The COVID-19 pandemic has had a very strong impact on all global economies across multiple sectors. Its impact on the US Pharma industry was significant in the first quarter, causing most companies to adjust and realign their businesses in response to the outbreak. The pandemic not only had a direct impact on Q1 revenues, but also affected overall drug development timelines for the majority of pharma / biotech companies, ultimately impacting long-term strategies and revenue forecasts. In Sedulo’s previous Q1 Earnings Narrative Report our team highlighted key themes that emerged after the Q1 earnings season.
With the majority of pharma / biotech companies having already announced Q2 earnings, the focus of this article will be on key findings from the second quarter, assessing whether the themes identified in Q1 continue to be prevalent, and if any new themes emerged in Q2 2020.
Certain Q1 Themes Continued to Prevail in the Second Quarter
Many companies reported an unfavorable net impact from COVID-19 on their Q2 revenues.
Companies preferred to present earnings as more representative of H1 2020 rather than Q2 2020, due to de-stocking of inventory that happened in Q2 after the forward purchasing in Q1.
- AbbVie reported an unfavorable net impact of $900M, roughly 8.7% of their Q2 earnings.
- Lilly reported an unfavorable impact of ~$250M, roughly 4.5% of their Q2 earnings.
- Merck reported an unfavorable impact of $1.6B, roughly a 14.5% of their Q2 earnings.
- Pfizer reported a net unfavorable impact of $500M, roughly 4% of their Q2 earnings.
Prescription trends for new patient starts continued to be a challenge across therapy areas. Most companies felt peak impact in the months of April/May, with recovery by early June.
- Merck reported that during the months of April and May, new patient starts in Oncology were down to a range of 5% – 10%, depending on the type of cancer; however, things improved as of June 2020.
- Lilly reported that for their diabetes portfolio, new prescriptions for the GLP-1 class were down by 32%, whereas prescriptions for the SGLT2 class were 38% less than pre-COVID levels.
- Within migraine, new to brand prescriptions for CGRP class of migraine drugs were 15% – 20% below pre-COVID levels for months April – July.
- New to brand prescriptions in immunology declined 36% during COVID-19 and recovery in this area has been slower with the current market still at 21% below pre-COVID levels as of July 2020.
Most therapy areas were affected, some more than others
- Oncology remained relatively resilient during the pandemic, with most of the drugs experiencing limited impact. BMS called out melanoma as the most affected oncology indication in terms of new therapy starts on their earnings call.
- Ophthalmology drugs saw a drastic decline in revenues. Novartis reported that Lucentis declined by 24% due to market decline and their mature ophthalmology portfolio was down overall by ~32.5%.
- Gilead reported that HCV revenues declined by 47% YOY and were down by 39% compared to Q1 2020, due to delayed patient visits and decreased diagnosis.
- Aesthetics portfolios also saw a decline as providers closed offices and AbbVie reported a decline of 47.9% for their aesthetics portfolio.
Vaccine portfolios across the board took a large hit and were by far the most affected
- GSK reported a 29% decline in their vaccines portfolio. Shingrix declined by 19%, the meningitis portfolio declined by 29%, while Hepatitis vaccines revenues declined by as much as 62%.
- Pfizer reported that Prevnar13 revenues declined by 22% in the US, reflecting the impact of disruptions to physician office visits.
- Merck reported that Gardasil revenues declined 24% YOY.
- Sanofi reported that their travel vaccine portfolio declined by 60% over the last quarter.
New Themes Emerging from the Q2 2020 Earnings Season
Although revenues for many drugs / biologics were impacted by the pandemic, some emerged as “invincible.”
- Humira revenues were $4B, an increase of 4.8% over Q2 2019. AbbVie indicated on the call that the impact on continuing patients on Humira was less than anticipated.
- Dupixent revenues were $835M, a YOY increase of 69%, and ~14% increase over Q1 2020. Sanofi reported that the 4 week rolling average for new prescriptions of Dupixent were at 87% of Q1 2020 levels.
- Keytruda sales were $3.4B, an increase of 31% over Q2 2019. The company attributed its new, less frequent dosing regimen as one of the key reasons for less than anticipated impact due to COVID-19.
- Pomalyst revenues were $745M, an increase of 21% over Q2 2019. BMS attributed increased treatment duration and oral administration as reasons for double-digit growth.
Adoption of Telehealth – The COVID-19 pandemic was a big catalyst for adoption of Telehealth in the US. The Trump administration played a significant role, as they relaxed some of the major restrictions that were holding back the widespread use of telehealth. The pharma sector was quick to respond and embrace this new engagement model. For a more detailed report on telehealth and its utilization by US Pharma, refer to Sedulo’s recent Telehealth Report.
- Biohaven pharma launched their migraine drug, NURTEC ODT during COVID-19 and partnered with Cove, a tele-medicine platform to enhance the virtual launch and provide patients with an easier access to their migraine drugs. Even after launching during the pandemic, Biohaven reported Q2 2020 revenues of $9.7M for Nurtec ODT and achieved market leadership in new prescription share at 52.6%.
- Novartis launched Tabrecta, a new drug for NSCLC, during the pandemic – through a first ever web-based and completely digital launch. Within the first month, there were 20,000 visitors on their patient website and 9,000 visitors on the HCP website. On their first live stream event, Novartis had more than 1.8M views, indicating a very strong early launch response.
- Sanofi extensively leveraged tele-medicine for detailing Dupixent. The company was quick to adapt to e-detailing during the lockdown and, as per surveys done by the company, more than 50% of dermatologists were willing to prescribe new medicines via tele-medicine. The survey also showed that 86% of dermatologists were comfortable continuing existing Dupixent patients via tele-medicine. Dupixent’s new prescription share of 87% during the pandemic may have solely been due to extensive tele-medicine adoption at both a physician and patient level.
Industry Opinion on the Executive Drug Pricing Orders Signed by the Trump Administration
Many big pharma players seemed to be in unison with their views on the recent Executive Orders on drug pricing, signed by the Trump Administration.
- BMS management indicated on their earnings call that they do not agree with the International Price Index (IPI) Executive Order and felt that it would hamper innovation and impact pharma companies’ ability to invest in R&D, in the US.
- Lilly management also noted on its call that the IPI will provide no benefit to patient out-of-pockets costs, but with the re-importation potential, it is more likely to have negative consequences for patients.
- Pfizer management also voiced their concerns over the IPI order and felt that it is a major distraction at a time when the industry needs to focus on developing treatments for COVID-19.
- GSK management further expressed their concerns on the IPI order, however, they voiced their support for programs that would lower out-of-pocket costs for patients.
Could cost savings and increase in productivity be an unintended outcome of COVID?
- Novartis management pointed out on their Q2 call that reduced spending during lock down led to an increase in productivity which they continue to see evolving in the second half of 2020.
- Lilly management called out a 9% decrease in their SG&A spend compared to Q2 2019, due to reduced marketing and travel, and meeting expenses that were partially offset by investments in virtual tactics. The company estimates savings of $200M for the year (3% of their annual revenues)
- Merck pointed to a $325M reduction of spending during Q2, driven largely by lower promotional and SG&A costs along with lower laboratory, travel, and meeting expenses.
- A few other companies including Pfizer, Sanofi, BMS, and AstraZeneca also noted lower SG&A spends during Q2 2020, attributing it to lower commercial activities in the field.
What can we continue to expect over the next half of 2020?
Uptick in new patient prescription trends and increased use of virtual detailing by pharma / biotech companies to better engage their stakeholders (physicians and patients).
- Most companies have invested in remote detailing capabilities and will continue to leverage them in addition to in-person visits in physician offices.
- Novartis mentioned that they have developed a “Digital Affinity” score for physicians to better understand where they are and how much digital promotion they can do.
- Pfizer indicated that all their US sales reps are digitally enabled and were conducting virtual detailing, and 2/3rd of their reps use the virtual communication platform. Going forward, they believe this will be a critical tool to tailor their approach to physicians.
Revenues for vaccines and aesthetic portfolios are likely to improve. Use of hospital products and surgery related products are also likely to increase with offices and clinics re-opening for patients.
- With the approaching flu season, revenues for flu and other vaccines are likely to grow, thereby reversing the trend for vaccine adoption over H2 2020.
- JNJ mentioned on their earnings call that the impact of COVID-19 on medical devices and surgeries has been less than initially anticipated, and they expect a faster recovery with pent-up demand likely to realize by Q3 rather than Q4 2020.
- Medtronic indicated on their Q1 2021 earnings call that although they incurred a 26% revenue loss over last quarter, procedure volumes are picking up across the globe faster than anticipated.
There could be access challenges for patients due to unemployment and COVID19 related disruptions, thereby impacting patient access strategies of pharma and biotech
With people losing their jobs and other COVID-19 related disruptions, companies might see potential changes to their payor mix (for their product portfolio)
- Lilly alluded to an impact of $200M due to anticipated increase in Medicaid utilization as opposed to commercial insurance in 2021.
- JNJ also indicated on their earnings call that although they haven’t seen any changes for their portfolio with regards to payor mix, they could potentially see an increase in Medicaid, health exchanges, and a number of uninsured patients depending on how the COVID-19 situation evolves.
The past six months have shown the resilience of the US pharma / biotech sector and its ability to adapt quickly to a global pandemic. While the situation is slowly improving, it appears that most of the big players in the industry were able to adapt quickly to the new normal. The pandemic’s impact on clinical stage companies and pipeline assets is yet to be fully understood and a lot will depend on how clinical trials resume once all the restrictions are lifted. But on a positive note, the pandemic may well have paved the way for an efficient operational approach towards marketing and physician and patient engagement.
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- Launch impacts (virtual launch strategies, timing, best practices)
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- Development timelines (clinical trial delays, protocol modifications, new site initiations)
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Aditya Kelkar
Director of Strategic Insights
References
- Company earnings calls and Company websites