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While the development of a COVID-19 vaccine could generate billions of dollars for some pharmaceutical companies like Pfizer, concerns over allegations of exploitation of the pandemic are likely to mitigate profits, experts suggest.
“It really doesn’t make sense to profit from this pandemic,” said Tinglong Dai, an associate professor of operations management and business analytics at the Carey Business School at Baltimore’s Johns Hopkins University.
“This is a perfect time for [pharmaceutical companies] to develop their brand equity, which will serve them well for long-term profits. In the long run, what’s really important to pharmaceutical manufacturers is brand value. So people trust Pfizer, for example. “
Vamil Divan, senior research analyst on biopharmaceuticals at Mizuho Securities, said he believes these companies are very aware of the need to be responsible for their prices and not to overcharge.
“I think they see fit to get back their investment. But I guess they are reasonable about it,” he said.
Giant pharmaceutical company Pfizer and fledgling biotech company Moderna, which both announced test results showing their coronavirus vaccine candidate is 95% effective, have indicated they will profit from their initiatives.
Some companies say they won’t profit during the pandemic
However, some other companies, including Johnson & Johnson and AstraZeneca, pledged not to profit from their vaccine, although they suggested that this would be limited to the period during the pandemic.
Stacie Dusetzina, an associate professor of health policy at Vanderbilt University, said that for an industry that hasn’t been popular with the public, this is an opportunity for pharmaceutical companies to come back in their favor, at least to some extent.
“I think they have a lot to offer if they don’t spoil everything,” he said.
However, Dusetzina noted, “I’m sure everyone will make a lot of money.”
How much money is difficult to determine. Michael Levesque, senior vice president of Moody’s Investors Service, said there is very limited data that would allow for an accurate estimate.
“We believe Pfizer vaccine will generate profits for Pfizer in 2021, but we have not made an explicit estimate of that profit, “he said.
What is known is that Pfizer, along with its COVID-19 vaccine manufacturing partner, BioNTech, will sell the vaccine for $ 19.50, that two doses are needed and that it will be able to deliver 1.3 billion shots. around the world by 2021.
Using this data, Cinney Zhang, an equity research analyst for Bloomberg Intelligence, calculated that Pfizer and BioNTech could expect $ 24 billion in revenues in 2021. This would equate to $ 7 billion in profit for each company.
“This could be a fluke,” he said.
Meanwhile Moderna, which said it will charge somewhere between $ 25 and $ 37 per dose, could add nearly $ 30 billion to its revenues, according to esteemed market analyst Peter Cohan, writing on Forbes.
Turning point for smaller companies
Surely for a smaller company like Moderna, the vaccine could be a game changer, Divan said. And while Pfizer is looking at some large revenue numbers, it “doesn’t really change the trajectory” of the company.
Pfizer generates about $ 50 billion in revenue annually, with up to about $ 16 billion in profits, said Damien Conover, director of health equity research and equity strategy for financial services firm Morningstar.
The COVID-19 vaccine, he said, will likely mean “quite a substantial gain” for Pfizer. Some of the vaccines, even at very low prices, will generate billions of dollars, he said.
But the gross margins on those dollars will be much lower than a typical gross margin for a large pharmaceutical company, he said.
“I’d probably frame it: some good profits for about a year for some companies.”
Conover also noted that after 2021 the COVID-19 vaccine market could become very competitive.
“Pfizer and Moderna, I believe, would have a hard time getting people to buy their vaccine for the $ 40 they will initially charge. So I think even those more modest profit levels will go down.”
Profits for Pfizer, for example, could be impacted by unexpected expenses, Zhang said. Their vaccine it needs to be stored at around -75 ° C, which means rising refrigeration costs could impact profits, he said.
The laggards in the market
Profits will obviously also depend on whether the vaccine continues to be needed, which could also have an impact on vaccine manufacturers arriving late to market.
“It is certainly possible that some of these reach the market too late to turn into significant opportunities, especially if the former [companies] they are very successful and widespread among the population, “Levesque said.
“If there is no need for revaccination, that scenario is one where some of the players who come out a little later may not have many market opportunities.”
However, if their vaccines prove more effective, easier to distribute, and revaccinations are needed, there may be opportunities for others, he said.
“Not to mention if any of the major players see production or safety issues emerging along the way, “he said.
“So it’s really too early to ultimately estimate who is most successful or to think that any company will be completely excluded. It’s still early days for anyone involved.”
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