War has had a negative effect on most sectors so far, with the only sector that seems like it has been profiting from it are oil and gas companies. One sector that is also expected to get hit hard is pharmaceutical companies. Ukraine and Russia are countries, where many of them were doing trials, importing medicines, etc., which will be almost impossible for at least until the end of the war. In Ukraine it will not be possible to do any trials because of the geopolitical situation going on there and in Russia, of course, because of sanctions. In this analysis we will check, which companies are expected to get hit the hardest as well as what impact happened in history.

History

One, positive effect from the war was in First World War, when the most dangerous weapon used was toxic mustard gas, for which it turned out in the end it can destroy lymphatic tissue and it is the very beginning of chemotherapy treatments for cancer. By 1949, FDA approved using mustard gas for therapies, and it became the multibillion dollars industry.

In the late 1980s, Iraq had the largest healthcare budget of any country in the Middle East. But because of the leaders at that time, pharma in Iraq owed massive amounts of money to foreign pharmaceutical companies, which as a result stopped importing medicines and stopped cooperation with them.

Also, with the current war, we cannot exclude a possibility of cyber-attack, which for example in 2017 when Russian hackers supposedly attacked United States tax accounting software, costed Merck & Co. 1.3 billion dollars of damage.[1]

India

Besides European economy, India is also expected to take the big hit and that is the reason why country is hesitant to condemn Russia’s invasion with sanctions[2]. India is the third largest exporter of pharmaceuticals to Ukraine, right behind the Germany and France.

India exported more than 181 million dollars of pharmaceutical goods to Ukraine and about 600 million dollars to Russia in 2021 alone[3]. Russia’s Sputnik vaccine against Covid is also being manufactured in India. And just for comparison, Sun Pharmaceuticals – one of the biggest Indian pharmaceutical companies has a presence in more than 50 cities around Russia. Financial reports also showed 5 percent year over year growth in 2021 concerning export to Russia.[4]

Sun Pharmaceuticals is saying that for now their primary objective is the safety of their employees, along with meeting patient needs and business continuity[5]. It seems, that for now they will continue to do business with both countries, regardless the situation – or at least, they will try. But one thing is for sure – as long as the war will last, their business in the region will be limited.

Movement of Sun Pharmaceuticals in 5-year period. (Source: Trading Economics)[1][2]

*Price is in Indian rupees

Europe and USA

As mentioned in the previous paragraph, Germany and France are the biggest importers to Ukraine and Russia. For example, Germany’s chemical-pharmaceutical industry is expected to suffer, because 6 billion dollars’ worth of chemicals (around 2,4% of the country’s entire exports), went to Russia in 2021. Because of the sanctions that Western countries put on Russia, this profit can be almost forgotten.

The biggest problems for European pharmaceuticals are the number of clinical trials that are being done in both countries. It is reported that both countries have participated in international studies and clinical trials for more than a decade. In Ukraine it is estimated, that before the war there were around 500 studies in progress[8], while in Russia more than 1500[9]. War has disrupted the trials and normal functioning of companies, which will bring the delay in bringing results. However, companies for now are saying that the supply chain should not be disrupted, but it is a bold claim to make, especially in situations like this. The supply of lifesaving medications to and from the region are already being disrupted. The WHO recently reported that there is already an urgent shortage of oxygen for use in healthcare in Ukraine.[10]

Pharmaceutical companies are also worried for the price of their stocks. Because of the inflation, the value of them already went down, but now with sanctions over Russia, it is expected to drop even more – especially companies that are traded in roubles or that have very close ties with Russia.

Among the sanctions from the West, for now Pfizer said that they will continue to maintain drug supply to Russia, but they will stop any new clinical trials in the country. The company added that they had decided for this because if they would stop providing medicines to their patients, it would be against their foundational principle of putting patients first.

Among Pfizer, also other major companies announced that they weren't planning to cut Russia completely[11] of business plan. Some of them include Johnson & Johnson, Abbott, Merck as well as European Novartis. Many of them said that they will stop investments and new trials in Russia but will not stop the cooperation for now. 

Movement of Pfizer in 5-year period. (Source: Trading Economics)[6][7]

Many companies have decided to help Ukrainians. So far there has been over 4,7 million doses of essential medicines and over 28 million euros donated by multiple companies[12]. Among the biggest donors we can also find companies that said they will continue business with Russia[13].

Conclusion

As it can be read from the analysis, we can see that the only good thing that was brought to pharmaceutical companies was the mustard gas, which was also a coincidence that it can somehow cure cancer. Otherwise, wars and geopolitical tensions were bad or mostly negative for this sector. Companies will have to find new partners or alternative sources to fill the gap in supply and export, that will be created because of the war. 

______

[1] https://www.bloomberg.com/news/features/2019-12-03/merck-cyberattack-s-1-3-billion-question-was-it-an-act-of-war

[2] https://qz.com/india/2139065/russia-ukraine-war-may-spell-trouble-for-indias-pharma-sector/

[3] https://www.businesstoday.in/latest/corporate/story/russia-ukraine-war-can-impact-indias-pharma-sector-experts-warn-323814-2022-02-24

[4] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.

[5] https://economictimes.indiatimes.com/news/economy/foreign-trade/pharma-companies-worried-as-exports-to-russia-ukraine-may-get-hit/articleshow/89810667.cms

[6] https://tradingeconomics.com/sunp:in

[7] Past performance is no guarantee of future results.

[8] https://www.labiotech.eu/trends-news/ukraine-war-europe-biotech/

[9] https://www.biospace.com/article/lessons-from-past-wars-could-offer-insight-for-biopharma-during-ukraine-war-/

[10] https://www.labiotech.eu/trends-news/ukraine-war-europe-biotech/

[11] https://www.beckershospitalreview.com/pharmacy/why-pharma-companies-aren-t-exiting-russia.html

[12] https://tradingeconomics.com/pfe:us

[13] Past performance is no guarantee of future results.