Is Pfizer’s Covid-19 vaccine the next hit drug?

November 9th^thWhen Pfizer announced the first positive results from its Covid-19 vaccine trial, the share price jumped more than 7%. It has since declined slightly, but investors are still watching Pfizer stock, trying to predict: Will the vaccine be one of Pfizer’s top income cows? Could it ultimately be the most profitable drug Pfizer ever made?

For decades, vaccines have mostly been overlooked by major pharmaceutical companies. Big drug makers have preferred to focus on drugs like Lipitor, a statin used to lower blood cholesterol, which was first approved in 1997 and contributed to Pfizer’s revenue a staggering $ 143 billion. 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 over the past 20 years.

Drugs like Lipitor and Norvasc are so profitable because they are prescribed to patients with a common and chronic condition, and as long as the drug is patent protected, this exclusivity translates into high prices and profit margins. For example, between 2004 and 2011, when his patent expired, Lipitor generated more than $ 10 billion annually.

Other profitable drugs can treat less common conditions but are sold at very high prices. For example, in 2018 a bottle of 90 pills of Lyrica, a drug that treats epilepsy as well as pain and neuropathic damage from diabetes, shingles, or fibromyalgia, cost over $ 650 before discounts and rebates. Since its FDA approval in 2005, Lyrica has generated over $ 52 billion in revenue.

Could the mRNA-based vaccine for Covid-19 – known, at least for now, as BNT162b2 – be just as profitable? Probably not.

The vaccine economics is different. Unlike a drug that treats an ongoing chronic condition, a vaccine and specifically a effective vaccine, typically requires only 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 lifetime booster dose. Even the seasonal flu vaccine is only given once a year, and this is for those who choose to take it.

There is a great demand for vaccines. After all, most of us have had quite a few at some point in our lives. Today, the CDC recommends that children receive more than 30 doses of the vaccine by age 12. However, traditional vaccines have abysmal profit margins. In 2005, global vaccine sales totaled $ 8.9 billion, significantly less than the amount earned in the same year by Lipitor alone.

But there has been an increase in vaccine investments over the past decade. Insurers and governments in developed countries have started paying higher prices, and demand for vaccinations 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 aged 65 and over to protect themselves from pneumonia. When it was approved in 2010, Pfizer was able to charge $ 108.75 per dose in the United States, much higher than previous vaccines, and prices have only risen. In 2019, Prevnar 13 posted revenue of $ 5.8 billion, more than Lipitor, Lyrica or Viagra.

But it is unclear whether BNT162b2 will have the same success. For starters Pfizer will not be able to charge such a high price for its coronavirus vaccine. Pfizer has signed agreements to supply 100 million doses in the United States, 200 million in Europe and 40 million in the United Kingdom. But these countless doses won’t sell for $ 100 or $ 200 per serving – the US government has agreed to pay just $ 19.5 per serving. And while Pfizer has said it will charge other developed countries a similar price for its vaccine, rivals Johnson & Johnson and AstraZeneca have both committed to making their non-profit vaccines available. For example, AstraZeneca charges governments only $ 3 to $ 5 per dose during the pandemic.

Furthermore, if there is a lesson that companies and governments have learned during the covid-19 crisis, it is that long supply chains and over-reliance on a few suppliers put them at risk. Governments are likely to purchase vaccines from multiple companies and may give preference to local producers. And there’s no shortage of competition – many other companies, including Johnson & Johnson, AstraZeneca, and Moderna, are also in the early stages of developing their coronavirus vaccine. Coronavirus vaccines have also been developed in other countries, such as China’s Sinopharm vaccine and Russia’s Sputnik V coronavirus vaccine.

All this competition means that while Pfizer’s profits next year are expected to be high – a recent analysis by Morgan Stanley estimates Pfizer’s revenues in 2021 will be similar to those made with Prevnar 13 in its peak year – it’s less clear that this level of sales will be sustained for years to come. Ironically, the more effective a vaccine is – and from early indicators, Pfizer’s vaccine appears to be quite effective – the less likely it is to generate income in the future. A sufficiently effective vaccine, after all, could eradicate the pandemic and become increasingly irrelevant.

BNT162b2 – we can hope it has a better name – will generate significant revenue and profits for Pfizer. But in all likelihood, it won’t be the new Lipitor. However, it will do something even more important: help save lives and livelihoods.