News, Culture & Society

ALEX BRUMMER: Mixed blessings for Pfizer

ALEX BRUMMER: Pfizer’s free cash flow could come in as high as £14bn this year – don’t discount possibility that it is building a war chest for acquisitions

As the pandemic wreaks havoc across the planet, it is hard to begrudge Pfizer its Covid vaccine triumph as it raised its jab revenue forecast to £24.1billion. 

The achievement in creating the first inoculation based on the new mRNA science and gearing up production is monumental. 

The income bonanza is not a good look for a pharma industry which likes to wrap itself in the cause of humanity, but is under fire in the US for high drug pricing. 

Booster: Pfizer’s achievement in creating the first inoculation based on the new mRNA science and gearing up production is monumental

There is a sharp contrast to be drawn between Pfizer’s supernormal revenues from the pandemic and the principle which has driven the Oxford Astrazeneca vaccine. 

Group chief executive Pascal Soriot made it clear from the outset that the first two billion or so AZ vaccine doses would be delivered at close to cost. 

Yet it has found itself vilified by European leaders over safety and challenged by Brussels over interrupted delivery schedules. 

Delayed approvals in the US, possibly due to a nationalist approach to big pharma, means it has not been rolled out in the American market. 

Accumulated evidence says that the AZ vaccine is as safe as the Pfizer, Moderna and Johnson & Johnson rivals. It was unfairly targeted for political reasons on the Continent, in spite of winning the go ahead from the European Medicines Agency (EMA).

It is a mark of continued investor confidence in AZ that it has been able to absorb rare disease maker Alexion for £28billion in the Covid era.

If AZ is a victim of US hegemony, Britain’s other pharma major Glaxosmithkline can be accused of coming late to the party. As one of the world’s top producers of vaccine, it formed what appeared to be a winning alliance with France’s Sanofi and also made undertakings to deliver vaccines at a modest price. Initial trials were disappointing but the vaccine is now being reviewed for use by the EMA. 

As the IMF noted this week, vaccine provision is still in the foothills with 40 per cent of the population jabbed in the advanced nations and just 11 per cent in the emerging market economies. There are still big markets to aim for. 

Second quarter results just released by GSK show that in spite of being behind the curve on Covid, vaccines are still growing by leaps and bounds with revenues up 39 per cent, reflecting strong growth in meningitis immunisation. It also reports £258m of sales from its pandemic adjuvant technology. GSK’s approved treatment for coronavirus, sotrovimab, is starting to gain traction. 

GSK is leaking cash as it raises R&D spend and pays a dividend. Progress being made should underpin chief executive Emma Walmsley’s hold on office as she fends off activist Elliott Advisers. 

The financial stress at GSK is in sharp contrast to Pfizer where free cash flow could come in as high as £14billion this year. Don’t discount the possibility that it is building a war chest for acquisitions.

Steel nerves 

Who would have thought it? A Tory government daring to involve itself in public ownership, a policy Labour resisted until confronted with the financial crisis.

 The purchase of Sheffield Forgemasters for £2.5m from private owners is recognition that the steel industry is strategic. In making the decision to bail it out, the Government recognised that at a time when the UK is committed to new nuclear, keeping control of the specialist steel supply chain both for civilian and military purposes is in the public interest. 

The deal was made easier by the UK’s exit from the EU, which means it doesn’t have to submit to Brussels scrutiny over subsidies. 

Of more significance will be what it may eventually mean for Sanjeev Gupta’s Liberty Steel group, which has been seriously weakened by financial links to collapsed Greensill. China’s Jingye Group, owner of British Steel, is thought to be interested. The souring of relations with Beijing may require a different outcome. 

A precedent has been set. 

Smart TV 

ITV is demonstrating that terrestrial television has a role to play in the age of Netflix, Amazon Prime and Disney Plus. 

Ad revenues, boosted by Euro 2020, were up 29 per cent in the six months to June. Income from ITV studios also advanced by 26 per cent in spite of Covid restrictions. 

Chief executive Carolyn McCall’s effort to conquer the digital world with ITV Hub and Britbox is also working, along with the broadcaster’s digital commercial platform Planet V. 

From little acorns…