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On the 9th of novemberthWhen Pfizer announced the first positive results of its Covid-19 vaccine test, its share price jumped more than 7%. It’s slowed down a bit since then, but investors are still looking at Pfizer stocks, trying to predict: Will the vaccine be a major revenue stream for Pfizer? Could it ultimately be Pfizer’s most profitable drug?
Vaccines were neglected by major pharmaceutical companies for decades. Big drug makers preferred to focus on drugs like Lipitor, a statin used to lower blood cholesterol, first approved in 1997 and has contributed a staggering $ 143 billion to Pfizer’s revenue. since 1999. Or Norvasc, a calcium channel blocker that widens blood vessels and improves blood flow, which has generated more than $ 50 billion in revenue for Pfizer in the last 20 years.
Could the new vaccine be Pfizer’s most profitable drug?
Medicines like Lipitor and Norvasc are very profitable because they are prescribed for patients with a common and chronic disease, and as long as the medicine is protected by a patent, this exclusivity translates into high prices and profit margins. For example, between 2004 and 2011, when its patent expired, Lipitor generated more than $ 10 billion a year.
Other cost-effective drugs can treat less common conditions, but are sold at very high prices. For example, in 2018, a 90-pill bottle of Lyrica, a drug that treats epilepsy, as well as neuropathic pain and damage due to diabetes, shingles, or fibromyalgia, cost more than $ 650 before refunds. and discounts. Since its approval by the FDA in 2005, Lyrica generated more than $ 52 billion in revenue.
Could the mRNA-based vaccine for Covid-19, known, at least for now, as BNT162b2, be just as lucrative? Probably not.
The economics of vaccines is different. Unlike a drug that treats an ongoing chronic disease, a vaccine and, in particular, a effective vaccine, usually only requires a few doses to offer lifelong protection. For example, the polio vaccine provides lifelong immunity, and adults who are at increased risk of exposure to the virus may receive another booster dose for life. Even the seasonal flu vaccine is given only once a year, and that’s for those who choose to take it.
There is a great demand for vaccines. After all, most of us have received quite a few of them at some point in our lives. Currently, the CDC recommends that children receive more than 30 doses of vaccines before age 12. However, traditional vaccines have abysmal profit margins. In 2005, worldwide vaccine sales totaled $ 8.9 billion, significantly less than the amount earned that same year by Lipitor alone.
But there has been an increase in investment in vaccines in the last decade. Insurers and governments in developed countries began to pay higher prices, and the demand for vaccination has also increased in developing countries. In fact, Pfizer’s best-selling drug these days is a vaccine called Prevnar 13, which is recommended for all children under the age of 2 and all adults 65 and older to protect against pneumonia. When approved in 2010, Pfizer was able to charge $ 108.75 per dose in the US, far more than previous vaccines, and prices have only increased. In 2019, Prevnar 13 had $ 5.8 billion in revenue, more than Lipitor, Lyrica, or Viagra.
But it is not clear if BNT162b2 will be as successful. For starters, Pfizer won’t be able to charge such a high label price for its coronavirus vaccine. Pfizer has signed agreements to supply 100 million doses in the US, 200 million in Europe and 40 million in the UK. But these massive doses will not sell for $ 100 or $ 200 per dose – the United States government agreed to pay only $ 19.5 per dose. And while Pfizer said it will charge other developed countries a similar price for its vaccine, rivals Johnson & Johnson and AstraZeneca have pledged to make their vaccines available on a non-profit basis. For example, AstraZeneca is charging governments between $ 3 and $ 5 per dose during the pandemic.
Furthermore, if there is one lesson that both corporations and governments have learned during the COVID-19 crisis, it is that long supply chains and overdependence on a few suppliers put them at risk. Governments are likely to purchase vaccines from several companies and may give preference to local manufacturers. And there is no shortage of competition: Many other companies, including Johnson & Johnson, AstraZeneca and Moderna, are also in the final stretch of coronavirus vaccine development. Coronavirus vaccines have also been developed in other countries, such as China’s Sinopharm vaccine and Russia’s Sputnik V coronavirus vaccine.
All of this competition means that while Pfizer’s earnings next year should be sizable (a recent Morgan Stanley analysis estimates that Pfizer’s revenue in 2021 will be similar to what it made from Prevnar 13 in its peak year), it’s less. clear that this level of sales will be maintained in the next years. Ironically, the more effective a vaccine is, and based on early indicators, the Pfizer vaccine appears to be quite effective, the less likely it is to generate future revenue. A sufficiently effective vaccine, after all, could eradicate the pandemic and become increasingly irrelevant.
BNT162b2, we can expect it to get a better name, it will generate significant revenue and profit for Pfizer. But in all likelihood, it won’t be the new Lipitor. Still, it will do something even more important: help save lives and livelihoods.
