Despite the likely distinction of being the first company to file for an emergency use authorization for a COVID-19 vaccine, Pfizer Inc. is unlikely to see tremendous profits from the vaccine on a scale that could "move the needle" for the pharmaceutical giant.
Pfizer and partner BioNTech SE were the first to issue efficacy results of 90% on Nov. 9, boosting that figure in a final analysis to 95% effectiveness on Nov. 18. Between those dates, smaller vaccine developer Moderna Inc. also found in interim efficacy results that its own mRNA inoculation was nearly 95% effective. The next step for Pfizer's vaccine is an emergency use authorization from the U.S. Food and Drug Administration, which the company expects to file within days.
Once on the market, based on early indication prices, Pfizer's vaccine is expected to pull in more than $8 billion in revenue by the end of 2021, split between Pfizer and BioNTech, according to Mizuho Securities analyst Vamil Divan. The companies have signed supply deals with a number of countries for millions of doses.
"Because [Pfizer's] vaccine has a very good chance to be the first one approved, we expect all those sales to be made," Moody's Senior Vice President and pharma analyst Michael Levesque told S&P Global Intelligence in an interview. "It's clearly sizable, and we know at least demand at the government level is going to be strong."
For Pfizer, the unexpected revenue jump from the vaccine is welcome, but long-term profits might not be dramatic, depending on the course of the pandemic in years to come.
"For Pfizer right now, we don't think it's going to be zero opportunity for them over time, but we also don't think it's going to be a $2 [billion] to $3 billion opportunity," Divan said. "And for a company Pfizer's size, that's what it takes to move the needle — it's not a game-changing opportunity for Pfizer long-term."
The uncertainty means calculating the impact for companies like Pfizer and others developing inoculations for COVID-19 is difficult, Divan said.
"There's a big bolus of sales potential in the next couple years without the usual tail, and I think none of us are really knowing how to value that," Divan said. "It's not the sort of steady stream that we're used to with a certainty of cash flow valuation to get a sense exactly how much this means to the company."
Pfizer and BioNTech have agreed to supply 300 million doses to the U.S. by the end of 2021 with the option for an additional 300 million doses. Hundreds of millions more are promised to the EU, Japan, the U.K. and others. The vaccine requires a two-dose regimen.
An initial $1.95 billion supply deal of 100 million doses signed with the U.S. in July set the price at $19.50 per vial, but the prices have not been officially disclosed.
Vaccines in the spotlight
The pharmaceutical industry's biggest vaccine players pull in billions per year in revenue from these products: GlaxoSmithKline PLC's vaccine portfolio made $9.5 billion in 2019, followed by Merck & Co. Inc. with $8.4 billion, Sanofi with $6.8 billion and Pfizer with $6.5 billion. All of these companies are developing a COVID-19 candidate.
Even though the initial windfall from the respective COVID-19 vaccines is likely to be a shot in the arm for companies through 2021, the candidates are less likely to be the massive blockbusters these companies are used to marketing. The pandemic could, however, change the dynamics of the vaccine sector within the pharma industry, Levesque said.
"There is a renewed focus on infectious disease, but how long that lasts will depend on not only this pandemic but future pandemics," Levesque said. "There is a sense of being more prepared and the sense that vaccines are big opportunities, so I think a lot of that focus will remain for some time."
The fact that companies not historically known as big infectious disease players — Johnson & Johnson and AstraZeneca PLC, for example — are making plays in both COVID-19 vaccines and treatments is a testament to the rejuvenation of the vaccine market, Levesque said. AstraZeneca has pledged not to make a profit from their COVID-19 vaccination during the pandemic.
Investment in companies like Pfizer — which can seize on an opportunity to develop vaccines and drugs under pressure at a time of great need — is likely to pick up, Divan said.
"Right now, there are a lot of great incentives to develop drugs and vaccines, as well as anti-infective development overall, to deal with some of these public health conditions that may not have had the same commercial attractiveness in the past," Divan said.
Competition is unlikely to faze Pfizer's 2021 vaccine performance with the demand so high, Levesque said. But if the vaccine were to become a recurring need — still an unknown in research circles — companies could start to compete with similarities to the influenza market today.
A new Pfizer, launched by COVID-19
For Pfizer in particular, being first to the table with results for a COVID-19 vaccine was symbolic of the smaller, innovation-driven company executives promised in July 2019. The company off-loaded the generics unit Upjohn into a new company called Viatris Inc., a combination with generics maker Mylan that closed on Nov. 16.
S&P Global Ratings and Moody's lowered Pfizer's credit rating after the spinoff completed despite the potential incoming vaccine revenue.
"It's the removal of a steady consistent stream of cash flow that leaves Pfizer with less flexibility to spend on discretionary uses such as acquisitions," Levesque said. He added that the vaccine did not drive Moody's view of the overall credit profile, but the main variable to consider from Pfizer's perspective is the virus itself.
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