The sellside’s mid-term forecast: sunny with few hints of rain

Climbing consensus sales forecasts for 2022 suggest that last year equity analysts brushed off concerns about pricing restraints. 

Over the course of 2018 the sellside’s outlook for global 2022 drug sales swelled by 2%. Forecasts for the US grew by even more: analysts added sufficient sales to their models last year to inflate the world’s biggest medicines market in 2022 by 3%. 

Drug pricing has been a live issue in the US for some time now, so the fact that the sellside’s biopharma outlook improved to such an extent is surprising. And we are talking big numbers: a 3% rise in the US equates to $14bn of extra sales appearing in consensus numbers over the course of 2018.

Change in 2022e forecasts worldwide over 2018
Change in 2022e forecasts US over 2018

This analysis was conducted by comparing EvaluatePharma’s current consensus forecasts for 2022 with the archived consensus that was compiled at the end of 2017. Not all products attract sales forecasts from sellside analysts, so this is an underestimate of the total drugs market; the analysis also excludes generics. However, it does provide a snapshot of the most important products for manufacturers of novel medicines, the fortunes of which are closely scrutinised by investors.

A dig further into the numbers shows that no individual products really stand out to account for these new sales. Merck & Co’s immuno-oncology drug Keytruda and Lilly’s diabetes therapy Trulicity received big uplifts; consensus for each product's sales in 2022 grew by around $2bn over the course of 2018, in the US alone. 

There were downgrades too: Novo Nordisk’s diabetes treatment Victoza and Abbvie’s experimental cancer treatment Rova-T had almost $1bn shaved from their 2022 numbers during 2018, the former because of competition from new arrivals and the latter owing to clinical failure. Overall, however, upgrades outweighed downgrades, producing a net uplift for 2022, even as executives continued to warn about price restraints. 

Upgrades and downgrades in 2022 forecasts over 2018

Of course, the sellside is not known for taking a gloomy position on the future. A previous analysis by Vantage found that in most years analysts add sufficient sales to their models to cause an uplift in the 12 months ahead (Investor sentiment vs sellside consensus: a chicken and egg situation, November 17, 2016). 

Perhaps this expansion in 2022 numbers would have been even greater in a world not fretting about price inflation. Recent weeks have heard the likes of Pfizer, Novartis and others stating baldly that sales growth in the future will need to come from volume, not price rises.

It is impossible to say how these collective models have accounted for price versus volume gains. But investors should contemplate whether the sellside’s confidence will only make it harder for the industry to deliver.

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