(Bloomberg) -- At first, it was mostly countries that figured the coronavirus was poised to become endemic. Now companies are at it too.
Roche Holding AG, one of the world's biggest makers of diagnostic tests, said Thursday that Covid-19 will probably start to wane next quarter, meaning demand for its testing kits will taper off. Siemens Healthineers AG, a smaller rival lifted by the current testing boom, also pointed to a likely slowdown later this year. And Quest Diagnostics Inc. said it expects slipping test sales this year as the world adjusts to Covid's long-term presence.
“We believe that the positive signs, which we see on the horizon, are real,” Roche Chief Executive Officer Severin Schwan said about the virus's trajectory.
Roche's guidance comes as more European countries roll back restrictions, acknowledging that efforts to control the omicron variant have been largely futile -- especially as intensive-care units are no longer filling up with Covid patients. Italy, Switzerland and Finland are set to join Denmark, Ireland and France in easing the bulk of restrictions on public life. Norway also relaxed most rules.
And it's not just test-makers that are feeling the shift. Companies that produce face masks and Covid therapies also cited the impact of slowing sales related to the pandemic in their earnings forecasts on Thursday.
Honeywell International Inc., the U.S. industrial giant, said a decline in N95 mask sales from a year earlier will have a 2 percentage-point drag on organic sales growth in the first quarter. Without that drag, organic sales, which strip out fluctuations from acquisitions, divestitures and currency, would be flat to up 3%.
“Masks are a bunch of noise into our numbers at least for the first half,” CEO Darius Adamczyk said on a conference call with analysts.
Read more: Europe Accelerates Move to Pandemic Exit as Risk Alert Fades
Merck & Co. edged back the upper bound of its forecast for 2022 sales of its Covid drug, molnupiravir, to a range of $5 billion to $6 billion. The company had earlier said revenue from the drug might reach $7 billion. The shares fell 2.1%
Changing Nature
Roche said the changing nature of the pandemic led it to forecast modest growth for this year, noting the possibility overall sales might not rise at all this year. That caused the stock to slump as much as 3.4% in Zurich trading.
Still, for now, demand for tests is at an all-time high as people get used to monitoring their status at home and many seek to confirm their findings with more reliable PCR tests, which are better at detecting omicron.
Quest said it is focused on ramping up investment in other areas of the business to offset declines from Covid tests but that it doesn't expect the demand for diagnostics to dry up for some time.
“It's going to be a permanent part of our portfolio,” CEO Steve Rusckowski said in an interview. “It still could be a nice piece of our business.”
Siemens Healthineers cited the surge as it upgraded its sales and profit forecast for its fiscal year Thursday. The stock climbed in Frankfurt.
The German company, which makes PCR and antigen tests, now expects diagnostics sales to more than double to 700 million euros ($790 million) this year even as the testing craze tapers off in the second half of 2022.
Another Wave?
Roche said its base assumption is for a slowdown in the second quarter, though Schwan qualified that prediction.
“It is possible we have another wave,” he said on a conference call. “I remember when we gave the guidance at the beginning of last year, we were much more conservative. Even in the middle of last year, I expected the pandemic would slow down, and then we were surprised by the delta variant and later by the omicron variant. But it could also be the case that the pandemic really comes to an end toward the middle of the year.”
The pandemic inflated the Swiss drugmaker's revenue by about 7 billion francs ($7.6 billion) last year -- much of that in diagnostics -- and Roche now estimates the number will likely drop to 5 billion francs this year.
Roche Sees Modest Growth as Demand Wanes for Covid Tests
Roche sells a variety of common Covid tests: PCRs, which are administered in labs and are the most reliable, antigen tests that give results in 15 minutes and are generally conducted at rapid testing booths, and the home variety, which has gained popularity in recent months. It has even started selling a test that can distinguish between Covid and the flu in 15 minutes.
Demand for at-home tests will probably slow first while sales of more reliable PCRs will show more resilience, according to Roche's Schwan.
Beyond diagnostics, it's equally hard to predict demand for Covid therapies, in part because it's unclear what the next dominant variant will look like.
While Roche's new monoclonal antibody therapy Ronapreve isn't effective against omicron -- and probably won't be effective against variants that descend from it -- it's possible that the next dominant variant will look more like delta or earlier strains, said Bill Anderson, Roche's head of pharmaceuticals.
©2022 Bloomberg L.P.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
