COMP NEWS – Inflationary pressures are putting a strain on the profitability of top pharmaceutical companies as input costs rise. Recently, executives at some of the largest companies in the industry have been expressing their expectations for lower profits than were seen in the boom year of 2021.

At Viatris, the effect of higher costs appears clear-cut, as inflation played a role in lower-than-expected profits for 2022. This week, CEO Michael Goettler said it was “not an easy decision” to publish earnings guidance lower than analysts and investors had anticipated.

In 2022, the company expects $5.8 billion to $6.2 billion in earnings before interest, taxes, depreciation, and amortization. Previously, Viatris had expected the “floor” to be $6.2 billion, Goettler said.

“What really has triggered is the incremental additional inflation that we saw,” Goettler said at the Raymond James investor conference this week. He went on to add that exchange rates played a role, as well.

In an attempt to temper investor expectations, Johnson & Johnson has made projections that factor in high rates of inflation throughout the year.

At the same Raymond James conference, J&J chief financial officer Joe Wolk said the global healthcare conglomerate built a “very healthy level of inflation or cost increases” into its 2022 plan.

“That’s probably gotten a little steeper over the last couple of days,” he added. “If you think about some of the factors such as oil production, titanium has spiked in the last couple days, some of those products go directly into the products that we have. And so I think it’s manageable at this point, but I say that again guardedly given that we don’t know where the conflict will resolve itself or when it will resolve itself.”

With the expected effects of inflation on profits in the pharmaceutical industry, executives are focusing on garnering good investor sentiment through honesty about their expectations for company financials in 2022.

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