Who will lead the way in pharmaceuticals, travel and technology in 2022? Image / FT.com
The pandemic could end in 2022 — or we may suffer fresh setbacks.
Operating with that huge global uncertainty, companies will record new triumphs and failures.
This is what to look for next year across the corporate world in industries from pharma to technology.
Trend to watch
Next year will
be a new test for the pharmaceutical industry's favourite four-letter acronym: mRNA, which stands for messenger ribonucleic acid. The Covid-19 vaccines proved the mRNA pioneers right: it is a rapid adaptable technology that can create highly effective vaccines.
In 2022, we will see early signs of how mRNA will perform beyond Covid, as Moderna, Pfizer, BioNTech and Sanofi will all publish data from trials using it for flu shots.
The profits could be huge but so is the potential for lawsuits over intellectual property.
Moderna has paused a dispute with the US National Institutes of Health over a patent application for now — but that may be just the first battle over who owns the secret sauce.
Biggest regulatory risk
The industry has cash to splash on deals but it is becoming wary of greater scrutiny of its acquisitions from antitrust regulators.
The classic model of big pharma companies buying biotechs with no or insignificant revenue could be challenged if the regulator looks instead at whether they are building a potential dominance in a new area.
Illumina, a genetic sequencing specialist, faces continuing challenges from both US and European regulators after it bought start-up Grail for US$8 billion.
Grail is a pioneer in the nascent but perhaps revolutionary field of liquid biopsy: blood tests for early detection of cancer. Regulators argue the deal could stifle competition in this field.
In a US election year, drug pricing reform is likely to remain a significant risk, even if investors had hoped that the industry's contribution to tackling the pandemic would turn down the political heat.
Person to watch
Emma Walmsley, GlaxoSmithKline's chief executive, had a tough 2021, with activist investors Elliott Management and Bluebell Capital questioning her position at the top of the UK drugmaker. In June, she insisted she was the "change agent" needed to overhaul the lacklustre pipeline of drugs in the pharma and vaccines unit.
Next year, that unit will be more exposed when GSK spins off its consumer health business, a joint venture with Pfizer. Walmsley will be scrutinised as she decides how best to spend the proceeds: a dividend of up to £8b before the demerger, and a 20 per cent stake in the new publicly listed group.
What would be the biggest surprise?
If Pfizer and Moderna had more supply than demand for their Covid vaccines. With huge swaths of the world unvaccinated and the Omicron coronavirus variant increasing demand for boosters, it appears highly unlikely that the vaccine makers have expanded production by too much. Hannah Kuchler
Trend to watch
Travel will be more expensive. Many airlines, particularly low-cost carriers, have been keeping fares low to stimulate demand during the pandemic. But when people can finally travel easily again, executives will want to repair battered balance sheets.
In Europe, demand for flying is set to outstrip capacity in summer 2022, leading to promises of pricier tickets — even from no-frills evangelist Michael O'Leary, chief executive of Ryanair. Airline costs are also rising mainly because of higher oil prices and airport charges. Expect this to be passed on to consumers, like it or not.
Biggest regulatory risk
Aviation has tried to stay ahead of regulation on carbon emissions with a series of ambitious environmental promises, including an industry-wide 2050 net zero carbon emissions pledge announced in the run-up to the COP26 climate summit in Glasgow.
2022 will be the year to set out concrete steps on how to get there, and will probably be a reminder that thrashing out the short and medium-term policies needed to cut emissions is the really hard part of the promises.
European airlines, mindful of political, regulatory and consumer pressure, are pushing for change, including a more comprehensive global carbon offset system, but it could be a struggle to convince airlines in emerging economies, which are eyeing rapid growth.
Person to watch
British Airways' chief executive Sean Doyle has been in near-permanent crisis management mode since he took over the top job in October 2020.
Flag carriers with complex networks focused on premium passengers and funnelling traffic to their long-haul operations have been the part of the industry worst hit by the pandemic.
When the clouds lift, what does the future hold for airlines such as BA? Doyle, a seasoned and highly regarded executive, will be instrumental in laying out the future for network airlines in an era when business travel is expected to fall. Are aviation's biggest operators targeting a return to the pre-pandemic status quo, or can they find new ways to grow in an increasingly fragmented market?
What would be the biggest surprise?
A smooth glide back to normality. The travel industry has proved remarkably resilient: companies have hoarded cash and cut costs to survive, and there have been notably few corporate casualties despite almost two years of disruption.
But the Omicron variant has raised new questions over the speed and duration of the recovery, and share prices in many companies were trading near 12-month lows by Christmas.
"2022 is going to be another rollercoaster," said one airline chief executive. Philip Georgiadis
Trend to watch
The return of the private equity initial public offering. A handful of US behemoths — Blackstone, KKR, Carlyle, Apollo and Ares — went public between 2007 and 2014 but received a lukewarm reception from investors in the early years.
Now, with markets soaring and buyout groups seeking to capitalise after raising their biggest-ever funds, a new cohort is following in their footsteps, or planning to.
TPG filed to go public in December and Bridgepoint and Antin Infrastructure Partners listed earlier this year. CVC Capital Partners, L Catterton and Ardian are among those on the watchlist for possible future listings.
Biggest regulatory risk
Gary Gensler, who was appointed chair of the Securities and Exchange Commission this year, is proposing a big overhaul that would demand more transparency about fees, expenses and performance in an industry not known for its openness.
Gensler has said he is concerned that private equity groups are hitting investors such as pension funds with opaque additional charges, and are not making basic facts available to the public, or even their own investors, to allow them to properly compare performance.
His agenda had "the potential to change the business of private equity forever", former senior SEC regulator Igor Rozenblit said last month.
Person to watch
Robert Smith, the billionaire founder of Vista Equity Partners. Fresh from settling a criminal tax investigation where he admitted to hiding $200m from the taxman offshore and evading US$43m in taxes, he is throwing himself into a comeback, with plans for a new multibillion-dollar Vista fund.
His success, or otherwise, will have huge consequences in the booming world of technology buyouts, where Vista is one of the world's biggest operators.
It will also be an important test for the public pension funds that provide much of private equity's firepower. Many are keen on exposure to lucrative tech deals. But it is another question whether they will invest public sector workers' savings with a man who evaded tax on his profits from previous Vista funds.
What would be the biggest surprise?
If any large economy decided to eliminate the carried interest tax break, which has helped enrich private equity millionaires and billionaires because it allows them to pay tax at lower rates on their share of the fund's profits.
Over the years, politicians from Barack Obama to Donald Trump to then-New York mayor Mike Bloomberg have said the tax break should be removed, and some private equity executives admit privately that a change would be fair.
But little has happened. A UK review led to no changes, and US president Joe Biden's plan to remove the perk has been significantly watered down. Kaye Wiggins
Trend to watch
The theme in the energy world in 2021 was the recovery in demand for oil, natural gas and electricity from lows earlier in the pandemic. In 2022, we will find out if supplies can keep up with now surging demand, or whether more price inflation is inevitable.
Despite the surge in oil consumption, producers are reluctant to spend on new production, sowing the seeds for yet more oil price rises in the year. Meanwhile, Russian president Vladimir Putin will decide whether to supply Europe with enough Russian natural gas to prevent a deepening crunch.
As governments from Washington to Beijing fret about the availability of fossil fuel supplies and their cost, the focus on energy transition and decarbonisation efforts could wane.
Biggest regulatory risk
Court battles in the US in 2022 may decide how much scope the federal government and its agencies have to keep regulating pollution. The Supreme Court will hear a case brought by coal companies challenging the Environmental Protection Agency's authority to limit emissions from power plants.
Meanwhile, according to the Glasgow climate summit, governments must also "revisit and strengthen" their emissions targets by the end of 2022, giving crucial investment signals to clean energy and fossil fuel suppliers alike.
Person to watch
Darren Woods, ExxonMobil's chief executive, has had a mixed year. In May, tiny activist hedge fund Engine No 1 capitalised on shareholder disquiet with Exxon's poor performance and climate strategy, winning a stunning proxy shareholder battle to secure the election of new directors to the board. Exxon has since announced a string of low-carbon initiatives.
But as surging oil prices raise profits, will the company expand its fossil fuel production to take advantage? Or push ahead with deeper commitments to curb pollution? What Woods does next at mighty Exxon will shape big oil companies' approach to the energy transition.
What would be the biggest surprise?
Saudi Arabia, Russia and other Opec+ oil producers have shown remarkable discipline in the past year, taking a measured, month-by-month approach to restoring the crude output they all cut in an attempt to prop up prices.
The oil market expects this steady policy to continue, keeping prices high. A breakdown in the Opec+ agreement or new price war — triggered by an unexpected surge in US supply, tensions between the United Arab Emirates and Saudi Arabia, or even an Iran nuclear deal — would be a big blow to otherwise bullish global energy markets. Derek Brower
Trend to watch
Web3 is a technology in search of a breakout application. The name applies to a collection of blockchain-based technologies that support a more decentralised version of the web — one where users, rather than giant tech companies, would be in control.
The first uses have come in unexpected places. One is DeFi, or decentralised finance, where users interact directly with each other, with no financial intermediary involved.
Another is non-fungible tokens — unique digital assets that touched off a booming new market in virtual art in 2021.
The hunt for more mainstream uses of Web3 will preoccupy large parts of the tech industry in 2022.
Biggest regulatory risk
The EU's one-two punch of the Digital Services Act and Digital Markets Act. These twin pieces of legislation are heading for legislative adoption in 2022, bringing the first sweeping regulatory response to the power of big tech companies.
Provisions include new responsibilities to police online content, requirements to share data and restrictions that would prevent the biggest tech platforms from giving preferential treatment to their own services. This would play havoc with their current ways of doing business.
A midterm election year in the US and lack of bipartisan agreement on how to restrain Big Tech make it unlikely Washington will act. That means all eyes will be on Brussels.
Person to watch
Elon Musk (again). Musk, the FT's Person of the Year, has been impossible to ignore in 2021 — which is just the way he likes it. There is no reason to think 2022 will be any different.
His private space company, SpaceX, will command much of the attention. A successful orbital launch of its Starship rocket would drastically cut the cost of getting to space, though Musk himself has warned of the huge challenges involved. If the SpaceX Starlink network enters commercial service, it will be the first satellite broadband network of its kind.
Meanwhile, Tesla's US$1 trillion stock market valuation could come under pressure as competition builds in the electric car market and some of its own new models face delays. But if Musk's record is any guide, he will find plenty of ways to make sure Tesla stays in the spotlight.
What would be the biggest surprise?
Mark Zuckerberg moving into a new role. The boss of Meta (formerly known as Facebook) is not yet ready to follow other Big Tech founders and step back — unlike Jeff Bezos, who slipped out the back door at Amazon in 2021, and the Google founders, who disappeared from the scene two years earlier.
But Zuckerberg has recently shown less appetite for taking on publicly Facebook's growing army of critics, instead devoting his energy to steering the company's next big technology shift, to the metaverse.
An organisational shake-up — like Bill Gates' move to become chief software architect at Microsoft in the middle of a regulatory backlash in 2000 — would free Zuckerberg to remake his company away from public pressure. Richard Waters
BNZ argues it has the contractual right to de-bank Gloriavale.