News & Analysis

Drug company dominance

Andrew Saks, Wednesday, 5 May 2021

What a dichotomy!

The past twelve months have been singled out by economists across the Western world as being a period which represents the worst recession in over three hundred years, and certainly the number of small businessmen and employees of long since locked down companies are left with the prospect of financial ruin.

On the other hand, the large Tier 1 banks have romped home with enormous profits, as made clear by the revelations last week in the first quarter earnings reports which saw some of the British financial institutions make 80% higher profits than the same time one year previous, before any damage was done to the economy as a result of lockdowns.

Today, another set of extraordinary figures is being discussed among investors and trading industry professionals, as these are set to be released tomorrow.

The absolute fortunes made by some of the world's largest banks over the past quarter was something of a surprise, especially given the exposure that they face in the light of collapsing businesses and outstanding, recently granted loans which are almost due for repayment. Will they be repaid, or will the businesses close down and leave the debt firmly on the doorstep of the lenders?

That may well be an anomaly insofar as that it would never have been predicted and sent a huge rush of confidence through the markets, taking the FTSE 100 index in the home market of the triumphant banks right the way past 7000 for the third time in a week, itself being the first week in a year that London's premier listed index had reached such heights, however what is coming tomorrow is perhaps a bit more predictable.

The big pharmaceutical companies are following in the footsteps of the major banks and also set to release huge profits for the first quarter of 2021.

Thus, we have now got a situation in which the general public, small businesses and many salaried employees in the service sector have had to tighten their belts whilst the banks and big pharma make hay.

How this will change the overall economic structure of the United Kingdom is yet to be known, however what is absolutely clear is that the landscape of the nation is starting to resemble a planned economy rather than a genuine free market in the respect that a few massive corporations with strong ties to the government are flourishing whilst the majority of people have to tighten their wallets, especially given the current involvement of politics in the products of pharmaceutical firms.

For those who think the banks and internet giants have rolled in nicely, the profits made by companies pushing vaccinations with the help of many Western governments are eye watering.

Pfizer, a company whose history is a patchwork of positive and negative circumstances, made a specific commercial decision to profit from its mass roll-out of medicine that is being encouraged by governments worldwide, unlike several rival manufacturers, which vowed to forgo profits on their shots during the past few months.

Forgoing profit may appear virtuous, but cold, hard profit is always central to the aspirations of big pharma, hence that could be viewed by the more cynical as a very clever PR exercise which would lead to profit from the regular, government-encouraged annual or six-monthly injections which many people will feel under pressure to receive.

Yesterday, the company announced just how much money the shot is generating. The vaccine brought in $3.5 billion in revenue in the first three months of this year, nearly a quarter of its total revenue and has been by far Pfizer’s biggest source of revenue.

Nowadays people immediately associate the blue oval logo with Covid-related medicinal politics rather than bags of manure from the local hardware store which is what it was once well known for producing.

Pfizer did not disclose the profits it derived from the vaccine, but it reiterated its previous prediction that its profit margins on the vaccine would be in the high 20 percent range. That would translate into roughly $900 million in pretax vaccine profits in the first quarter.

Pfizer stock is very much on the rise, and today sits at 40.78 USD per share.

Moderna is set to release its first quarter profits tomorrow, and already confidence is high with a 2.91% gain in the last day, resting at 178.65 USD per share. That is on a par with some of the world's largest banks, to put this into perspective.

Moderna shares are up about 71% so far this year, lapping the S&P 500, which is up about 11%. Early Thursday, investors will get a look at how Moderna plans to sustain this performance, as the company presents its first-quarter financial results.

The company has an earnings call tomorrow at 8,00am Eastern Standard Time in which the actual figures will be released, but it is clear that they will be extremely high, contrasting dramatically from last quarter's negative earnings surprise.

Basically, it is a case of the big banks, pharmaceuticals and internet giants raking it in whilst they grow their influence on an increasingly less financially free population, and that in itself is a cause to consider the changes in the landscape of trading in large company stock and its price movements.

Share article