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COVID-19 May Accelerate Disruption In The Global Vaccine Market

Vaccines stimulate a person's immune system to protect them from a specific disease, exemplifying the expression: "An ounce of prevention is worth a pound of cure." Indeed, according to the World Health Organization (WHO), vaccines prevent two million to three million global deaths annually, and could prevent an additional 1.5 million deaths each year with improved access.

S&P Global Ratings believes the worldwide vaccine market currently provides industry participants steady and healthy revenue growth of about 5%-7% annually, and good profitability supported by significant barriers to entry.

Chart 1


The vaccine market has attracted a lot of public attention recently, largely due to the coronavirus pandemic, resulting in an investment surge as part of the race to develop a COVID-19 vaccine. Although this could add tens of billions of dollars to industry revenues in 2020-2022, we think it may also accelerate technological innovations and support the ambitions of potential market entrants, leading to more intense competition and margin pressure. Alternatively, it may lead to leverage-harming mergers and acquisitions (M&A) as leading market participants seek to protect their leadership positions.

The Vaccine Market Differs From The Pharma Market

Although the vaccine market shares many characteristics with the broader pharmaceutical market, including substantial barriers to entry in the form of high fixed costs; often, long production timelines; substantial intellectual property; high regulatory requirements; and low sensitivity to the business cycle, they differ in notable ways.

More specifically, market participants can benefit from greater government funding for research and development (R&D), government promotion and purchasing of vaccines, higher revenue growth, a high degree of consolidation and less intense competition, and products with long lifecycles. On the other hand, vaccine manufacturers also have a more consolidated group of buyers, weaker pricing power, and may face elevated risks of disruption from technological advances.

The differences result in a distinct set of opportunities and key credit risks, and provides the four large pharmaceutical companies that participate in, and dominate, the vaccine industry, an extra element of business diversity. For example, we view the vaccine market as relatively immune to generic competition in developed countries and to potential drug-price reform in the U.S.

Table 1

Differences Between Big Pharma Industry And The Vaccine Segment
(Branded) Pharmaceutical Industry Vaccine Segment
Market size and growth $1.3 trillion global market, growing in the low-single digits annually $33 billion global market, growing in the mid-single to-high-single digits annually
Industry consolidation Moderate consolidation with 15 Big pharma companies representing about 40% of industry revenues Four players (GSK, Merck Pfizer, Sanofi) represent 90% of industry revenues
Customer base National goverments and health agencies in many countries and private insurance payers in other countries. Also PBMs, employers and patient out of pocket costs, in the U.S. Similar, except humanitarian organizations (e.g., UNICEF, WHO) are major buyers for developing countries. Also out of pocket costs to users are more limited
Price trends High product prices. Price and volume generally decline significantly upon patent expiration Low product prices. Does not experience sharp drop in price following patent expiration
Volume Most products are low volume, targeting individuals with a specific disease High volume targeting the healthy population (often children).
Investment Drug development and marketing are exceedingly expensive and primarily borne by the pharmaceutical manufacturer Governments and humanitarian organizations subsidize vaccine R&D, and promote vaccine adoption
Reputational risks High out of pocket costs in U.S. is generating risk of drug price reform Immune to drug price reform, but exposed to anti-vaccination/over-vaccination movements
Geographic dispersion of revenues Companies focus on developed countries and especially the U.S., where pricing is more attractive Humanitarian organizations direct a meaningful portion of demand to developing countries. Prices are much higher in developed countries.
Outsourcing of manufacturing Common across the industry particularly among smaller pharma companies Given high volumes, low product prices, and consolidation by big pharma, has not as been extensively outsourced.
Product characteristics Some products are episodic, others are chronic. Mostly restorative with some products that are preventative Products are mostly preventative in nature, generally episodic (in childhood), though global births provide a steady stream of demand
Key credit risks M&A, Drug Price Reform in the U.S., litigation Technological advancements, new market entrants, lower barriers to entry, headwinds to vaccine adoption rates
ASP--Average sales price. PBM--Pharmacy benefit managers. M&A--Mergers and acquisitions. R&D--Research and development. Sources: S&P Global Ratings, company reports.

The unique characteristics of the vaccine market that distinguish it from the pharma market are detailed further in Appendix 1

Vaccine Industry Has Healthy Growth

The global vaccine market generated approximately $33 billion of revenue in 2019, which represents less than 3% of the global pharmaceutical market. In contrast, the global market for oncology drugs in 2019 was about $142 billion. The population base of healthy individuals for preventative vaccines is much larger, and represents a younger demographic than for conventional restorative-type medicines. Indeed children receive the majority of vaccines, often focusing on childhood diseases.

The vaccine industry has experienced robust growth over the past two decades with a compound annual growth rate (CAGR) of more than 6% over the past five years. And, we expect annual growth of about 5%-7% over the next five years, excluding the growth from a COVID-19 vaccine. Market growth is supported by the development of more vaccines addressing new indications (see tables 2 and 3); higher prices on new innovative vaccines; increased demand in emerging markets; and the growth of combination vaccines, such as the measles, mumps, rubella, and varicella (MMRV) vaccine. These combined vaccines earn premium pricing by enhancing the efficiency of doctors by addressing multiple indications with the administration of a single injection, facilitating widespread adoption through easier dosing.

Chart 2


Table 2

CDC Recommended Childhood Vaccines--U.S.
late 1970s 1985-1994 1994-1995 2000 2005 2010 2019
Diphtheria* Diphtheria* Diphtheria* Diphtheria* Diphtheria* Diphtheria* Diphtheria*
Tetanus* Tetanus* Tetanus* Tetanus* Tetanus* Tetanus* Tetanus*
Pertussis* Pertussis* Pertussis* Pertussis* Pertussis* Pertussis* Pertussis*
Polio (OPV) Measles** Measles** Measles** Measles** Measles** Measles**
Measles** Mumps** Mumps** Mumps** Mumps** Mumps** Mumps**
Mumps** Rubella** Rubella** Rubella** Rubella** Rubella** Rubella**
Rubella** Polio (OPV) Polio (OPV) Polio (IPV) Polio (IPV) Polio (IPV) Polio (IPV)
Hib Hib Hib Hib Hib Hib
Hepatitis B Hepatitis B Hepatitis B Hepatitis B Hepatitis B
Varicella Varicella Varicella Varicella
Hepatitis A Hepatitis A Hepatitis A Hepatitis A
Pneumococcal Pneumococcal Pneumococcal
Influenza Influenza Influenza
Rotavirus Rotavirus
*Given in combination as DTP/DTaP. **Given in combination as MMR. This excludes vaccines for adolescents such as Meningococcal (meningitis) or HPV, which were introduced/recommended in the last 15 years. It also excludes a vaccines specifically for adults (e.g. Shingles, introduced in the last 15 years, recommended for individuals 50 years and older). Several of these vaccines are given more than once. The Influenza vaccine is recommended annually (18 times, over the course of childhood and adolescence). Various vaccines were updated to address more types (e.g., more types of HPV). In general, the U.S. guidelines provide more vaccines than in other countries. Source: Children's Hospital Of Philadelphia (CHOP) vaccine education center.

Table 3

New Molecular Entity Phase Vaccine Products
Company Phase Vaccine Product Vaccinates Against

GlaxoSmithKline PLC

II GSK3277511A  COPD
II GSK3437949A Malaria
II GSK3902986A  Shigella diarrhea
II GSK3389245A/GSK3888550A RSV


III Nirsevimab Respiratory syncytial virus
III VerorabVax Rabies
II HIV Viral vector prime & rgp120 boost vaccine

Pfizer Inc.

III PF-06425090 Clostridioides difficile
III PF-06482077 Pneumococcal
II PF-06760805 Invasive Group B Streptococcus
II PF-06842433 Pneumococcal (infants and children)
PF-06886992 Meningococcal
PF-06928316 Respiratory syncytial virus

Merck & Co. Inc.

III V114 Pneumococcal
II V160 Cytomegalovirus

Takeda Pharmaceutical Co. Ltd.

III TAK-003 Dengue
II TAK-214 Norovirus

Johnson & Johnson

III VAC52150 Ebola (EU approved)
II VAC18193 RSV (Senior)
Novavax Inc. (not rated) III NanoFlu Influenza
Inovio Pharmaceuticals Inc. (note rated) III VGX-3100 HPV
COPD--Chronic obstructive pulmonary disease. RSV--Respiratory syncytial virus. HIV--Human immunodeficiency virus. HPV--Human papillomavirus. Sources: S&P Global Ratings, company reports.

COVID-19-Related Revenues Are Temporary And Highly Uncertain

We expect COVID-19 vaccines could potentially generate tens of billions of revenues in 2020-2022, pending regulatory approval, but then potentially taper off, following the initial surge. However, due to uncertainties around pricing (including commitments to limit profits) competition, rate of adoption, and the potentially temporary nature of that initial demand, our discussion of industry growth here, largely excludes the potential impact of COVID-19 products. (See "What Does Pharma’s Quest For A COVID-19 Vaccine Mean For Its Credit Quality And ESG Profile?" published July 8, 2020.)

That said, the vaccine market is getting renewed attention as part of the race to develop a COVID-19 vaccine, and a surge of investment may accelerate technological advancements and support the ambitions of potential market entrants including small biotech companies, leading to more intense competition and margin pressure. It may also lead to leverage-harming M&A as leading market participants seek to protect their leadership positions with debt-financed acquisitions.

Contract development and manufacturers of drug products (CDMOs) are benefitting from the sudden surge in demand for available manufacturing capacity, to support COVID-19 vaccines. Although we expect a portion of that demand to subside once the initial wave of vaccines is available, we see CDMOs having a more sustained benefit as a necessary partner to small biotech companies entering the market that don't have their own manufacturing capacity, at least as long as those companies remain independent. Moreover pressures on Big Pharma to onshore more production and diversify supply chains resulting from the pandemic, may lead them to increase utilization of CDMOs, over the next several years.

Growth Prospects Remain Attractive

We expect industry growth to remain attractive, in the mid-single-digit (5%-7%) range, driven by more new products (for new indications) increased adoption of existing higher-margin products, greater use in emerging markets, and new vaccine technologies (e.g, mRNA and DNA).

By 2026, we expect:

  • Merck & Co. Inc. (Merck) to benefit from about $3 billion of revenue growth for its human papillomavirus (HPV) vaccines Gardasil 9 (to around $6.5 billion);
  • GlaxoSmithKline LLC (GSK) to see nearly $3 billion in growth for the shingles vaccine Shingrix (to around $4.8 billion);
  • Pfizer Inc. (Pfizer) (to benefit from $1 billion in revenue growth from its pneumococcal vaccine Prevnar 13, (to around $6.9 billion); and
  • Sanofi to see $1 billion in growth from its influenza vaccine FluZone (to around $3.0 billion).

Moreover, the four large vaccine makers also have healthy development pipelines (see table 3), although profits from these investments may take years to materialize.

Disruption Could Shake Up The Market

The COVID-19 vaccine race has rapidly lifted some lower-profile biotech companies into prominence. Among these, Moderna (not rated), Novavax (not rated), and Inovio (not rated), boast innovative vaccine development technologies. Moderna utilizes messenger RNA (mRNA), Inovio uses DNA with electroporation, and Novavax uses a nanoparticle-based vaccine technology. These new technologies have the potential to shake up the vaccine industry. (See Appendix 2 for more details on these technologies).

Alternatively, the major vaccine players could acquire or adopt these technologies. Indeed, GSK, Merck, Pfizer, and Sanofi have already announced partnerships with biotech companies Curevac (not rated), Moderna, BioNTech, and Translate Bio (not rated), respectively, on mRNA vaccines. Pfizer's most promising COVID-19 vaccine is an mRNA vaccine, developed in partnership with BioNTech. Given the extensive R&D and business development budgets of the big pharmaceutical companies, it's likely they can best leverage novel technological advances in the development or production of their various vaccine candidates.

In a similar vein, Vaxart (not rated) is developing oral vaccines that are stable at room temperature. This innovation could significantly improve vaccine adoption rates by appealing to individuals with a strong aversion to needles (trypanophobia) and make distribution easier and cheaper without a need for cold storage, vials, or syringes. While promising, it seems likely that GSK, Merck, Pfizer, and/or Sanofi could replicate or license the technology once proven effective. At the same time, these industry leaders are, of course, using their financial strength to invest in these innovations. GSK's adjuvants and Merck's nonreplicating viral vectors are two examples that provide promising options for future vaccine development.

One particularly attractive feature of some of the new technologies is that they can significantly shorten the developmental timelines of vaccines. Vaccines for COVID-19 continue to progress at a record-setting pace. While this is partially due to the severe economic fallout, the uniquely supportive regulatory environment, a willing group of participants in clinical trials, high levels of government and institutional investments--including starting manufacturing prior to approval--and technological changes, have also significantly helped accelerate the advancement of vaccine candidates. We believe some of these new technologies have the potential to disrupt the vaccine market, and even potentially the much larger and more lucrative biologics market. Given that many of the new vaccine technologies are not egg-based, production is generally faster. If new technologies can shave several years or more off the traditional 10-15 year development window for a new vaccine, it could substantially lower developmental costs, and significantly improve margins and returns on investment (ROI). In turn, this could attract more pharma companies to join (or re-join) the vaccine market, shaking up the status quo and increasing the intensity of competition.

Additionally, with multiple pathways--DNA, mRNA, replicating viral vectors, protein-based, nonreplicating viral vectors, and whole virus--each having differing safety and efficacy profiles, success with these technologies could introduce a greater degree of competitive offerings for individual indications, targeting differing patient profiles, providing companies could earn a satisfactory ROI, despite the lower scale. While increased vaccine competition would likely have negative implications for GSK, Merck, Pfizer, and Sanofi, increased specialization in the vaccine market could in turn, lead to increased pricing power for manufacturers.

Another factor facilitating disruption from new entrants is outsourced manufacturing. The CDMO companies supporting the pharmaceutical companies have become increasingly sophisticated, frequently producing complex biologic drugs for Big Pharma companies. This sophistication, in turn, can help level the playing field by eroding some of Big Pharma's manufacturing advantages allowing new entrants, including small biotechs into the vaccine market by facilitating the ability to produce products without incurring prohibitively expensive fixed costs. Indeed, Lonza Group Ltd. has agreed to manufacture Moderna's mRNA-based COVID-19 vaccine, and Catalent Inc. is supporting at least five biopharmaceutical companies on their COVID-19 vaccine programs.

As such, and with the increased attention given to vaccines and the potential increased investment in pandemic prevention, we see some risk that other Big Pharma companies could make material moves back into the vaccines market. The potential opportunity in the market is substantial given the potential for blockbuster products, such as Pfizer's Prevnar (pneumococcal; the highest grossing vaccine with $5.8 billion of revenue in 2019) and Merck's Gardasil (HPV; the second highest revenue-generating vaccine with $3.7 billion of revenue).

We suspect some other big pharmaceutical companies, aside from the four dominant players, may attempt to carve out a role in the vaccine industry, especially given these technological developments. For example, both Johnson & Johnson (JNJ) and Takeda Pharmaceutical Co. Ltd., have been actively investing and could substantially increase their presence in the vaccine market within the next several years. JNJ has paired its AdVac adenovirus with Bavarian Nordic A/S in developing a recently EU-approved Ebola vaccine, and is using it in developing vaccines for COVID-19, HIV, RSV, and Zika. JNJ also has a commercialization option with Vaxart's universal flu vaccine candidate. Takeda has dengue and norovirus vaccines in its pipeline with major commercial potential within the next few years. AstraZeneca PLC's head of R&D cautioned he's not sure if it wants to become a vaccine company, but indicated management will be looking at next-generation vaccines through its support of the Oxford-based pandemic preparation group.

Thus, although our base case is for the leading players to benefit from ongoing growth in the vaccine market, the industry has its own set of headwinds, including risk that new technologies and new market participants could intensify competition in the industry and pressure margins.

Other Emerging Industry Challenges

The vaccine market has faced other emerging challenges in recent years, including:

  • The anti-vaccination movement, not supported by conventional medical establishments, has gained varying degrees of strength in various geographies and promotes allegations that the increasing number of childhood vaccines contribute to various illnesses. The resurgence in preventable diseases, such as measles, in developed nations highlights the significant influence of the movement.
  • Research shows that the fear of needles, or trypanophobia, contributes to lower adoption of vaccines. This likely has a greater impact on vaccines perceived to be more discretionary, such as the seasonal flu vaccines (with less than 50% rate of adoption by adults in the U.S.). Studies shows the prevalence of trypanophobia has grown over time, in conjunction with the rising volume of childhood vaccines (see table 2).
  • The HPV vaccine has also faced controversy with some asserting that widespread administration of the vaccine to adolescents increases the early onset of sexual relations. Moreover, the HPV vaccine has had challenges gaining adoption for use by males.

We believe these challenges may present ongoing headwinds for the vaccine market and some of its new offerings.

Appendix 1

How The Vaccine Market Differs From The Pharma Market

The vaccine market is highly consolidated

The vaccine industry is more highly consolidated than the broader pharmaceutical industry. In fact, the four largest participants, (i.e., GSK, Merck, Pfizer, and Sanofi) generated more than 90% of vaccine revenues in 2019, selling all of the top 20 vaccine products as measured by revenue. The next biggest players include CSL Ltd. ($1.1 billion of vaccine revenue in 2019), Emergent BioSolutions (not rated; $415 million), and Sinovac Biotech (not rated; $244 million).

Market consolidation partially resulted from limited profitability and high fixed costs compounded by significant development risks and long developmental timelines, which led various pharmaceutical companies to abandon or scale back vaccine programs over the past two decades. For example, Baxter International Inc. exited the industry in 2014 and Novartis AG left the market in 2015. Consolidation among big pharma companies in recent decades also contributed to the significant reduction in industry participants.

There's limited competition

We believe that industry characteristics, including remarkably high capital investment requirements, economies of scale (often vaccines require their own manufacturing plant), substantial development risks, sterile manufacturing conditions, and high standards demanded by regulators, are barriers to entry and limit the competitive intensity.

A substantial portion of the costs associated with vaccine development and production involve meeting regulatory requirements that address manufacturing practices and quality. The U.S. Food and Drug Administration's Center for Biologics Evaluation and Research (CBER), maintains responsibility for licensing new vaccines and establishes high standards for manufacturing processes, facilities, and pre- and post-licensing clinical studies to ensure the safety and efficacy of licensed vaccines. We believe the limited competition from generic competitors is an important benefit supporting healthy profitability.

Interestingly, most of the 20 highest revenue-generating vaccines in 2019, (see table 4) are off-patent. The ability of vaccines to continue generating substantial revenues well after patent expirations is an economically important difference between vaccines and most other products in the broader pharmaceutical sector. This is partly because generic vaccines (like biosimilars) require tremendous investment (including large clinical trials), and high manufacturing expenses. In addition, vaccine prices aren't high enough to support generic competition (or even multiple players) for most products. Because most mature vaccine products have less attractive margins, we don't believe generic competition is likely to materialize. Indeed, the Food And Drug Administration (FDA) hasn't approved any vaccines via the Biologics Price Competition and Innovation Act of 2010.

Table 4

Leading Vaccine Products And Producers In 2019
Company 2019 vaccine revenue Vaccines as % of total revenue Vaccine products Vaccinates against 2019 WW revenue % of vaccine portfolio Patent expiry
GlaxoSmithKline (A/Stable/A-1) $9.0 billion 26.70% Shingrix herpes zoster (shingles) 2311 26% Dec-26
Hepatitis Vaccine Franchise hepatitis 1116 12%
Pediarix DTP, hepatitis B, Polio 936 10% Dec-18
Bexsero memingococcal B 867 10% Dec-27
Boostrix DTPa 746 8% Dec-17
Rotarix rotavirus 713 8% Dec-22
FluLaval influenza 691 8% Dec-22
Synflorix pneumococcal 598 7% Dec-24
Others 1026
Merck (AA-/CW Neg/A-1+) $8.2 billion 17.50% Gardasil HPV 3737 46%


Varivax varicella 970 12%


Pneumovax pneumococcal 926 11%


RotaTeq rotavirus 791 10% Feb-19
ProQuad MMR and varicella 756 9%
M-M-R II MMR 549 7%
Others 468
Pfizer (AA-/CW Neg/A-1+) $6.5 billion 12.40% Prevnar 13 pnemococcal 5847 90% Dec-26
Others 623
Sanofi (AA/Stable/A-1+) $6.3 billion 16.70% Pentacel DTaP, Hib, polio 2178 35% Sep-02
FluZone influenza 2117 34%
Menactra meningococcal A, C, W-135 & Y 763 12%
Adacel DTPa 630 10%
Avaxim hepatitis A 603 10%
Others N/A
Others $3.1 billion
Total vaccine market $33.1 billion
WW--Worldwide. DTP--Diptheria, tetanus, and pertussis. HPV--Human papillomavirus. MMR--Measles, mumps, and rubella. Hib--Haemophilus influenzae type B. Sources: S&P Global Ratings, company reports.

Head-to-head competition does, however, arise occasionally. For instance, both Merck and Pfizer have pneumococcal vaccines in their late-stage pipelines that seek to supplant Pfizer's Prevnar 13. Multiple vaccines are also in development from multiple companies to address cytomegalovirus and respiratory syncytial virus (RSV). We believe competition is unlikely to pressure prices on the products in the U.S., especially if there are material differences in efficacy or safety. However, we would expect competition to intensify pressure on price in developing markets or in those countries or product categories where governments play a larger role.

Governments influence the vaccine market

The substantial societal benefits and economic efficiency of vaccines (as an ounce of prevention) for public health result in governments and humanitarian organizations playing a prominent role in funding R&D efforts and promoting the usage and purchasing of vaccines.

Various partnerships aid pharmaceutical companies in their efforts to profitably research, develop, manufacture, and distribute vaccines. Public sector and academic institutions often receive funding or grants toward the development of vaccines, particularly those considered in the public interest that may not be commercially viable for the private sector, such as those designated for potentially short-lived epidemics like SARS and Zika.

However, once developed, the approval and commercialization process can be extremely costly and time-consuming, requiring a great deal of expertise and large capital outlays. As a result, these institutions often partner with large pharmaceutical companies who are well positioned to share both the risks and rewards of seeking the commercialization of new vaccines. For example, the University of Oxford is partnering with AstraZeneca to develop and distribute its COVID-19 vaccine candidate and the Public Health Agency of Canada began development on an Ebola vaccine, which ultimately Merck took over. We believe the pharmaceutical industry brings regulatory and manufacturing expertise, as well as significant resources and risk tolerance, which enhance and accelerate the development of new vaccines.

Some examples of government and institutional funding of vaccine research include:

  • The U.S. Agency for International Development (USAID).
  • The Norwegian-based government and foundation funded Coalition for Epidemic Preparedness Innovations (CEPI).
  • The Department of Health and Human Services' Biomedical Advanced Research and Development Authority (BARDA).

Moreover, various entities promote vaccines for humanitarian, national health, or national security interests. Public health departments in developed countries often promote the benefits of vaccine to the medical community and directly to the public and sometimes institute policies that enforce that. For example, government departments of public health in the U.S. generally require children to remain up to date on certain childhood vaccines to participate in public and even private schools. Additionally, governments often require immunizations prior to travelling to or from certain countries, easing the marketing burden of vaccines relative to other pharmaceutical products.

These contributions to research and support of vaccine usage significantly reduce the large financial investment in R&D as well as marketing expenditures for pharmaceutical companies that participate in the vaccine market.

Some examples of governments and institutions that are major purchasers of vaccines include The United Nations International Children's Fund (UNICEF) and the WHO, as well as others that have helped transform the vaccine industry into a unique marketplace.

  • UNICEF has been the largest purchaser of vaccines for children in the world; in 2016, it procured 2.5 billion vaccine doses for children in nearly 100 countries.
  • Another group, Gavi, the Vaccine Alliance, is a public-private partnership that plays a prominent role in increasing access to immunizations in poor countries. To provide a sense of scale, Gavi has more than $10.5 billion in pledged resources for 2021-2025.
  • Even within the U.S., the public sector purchases more than half of all vaccines and the federal government purchases more than half of all childhood vaccines.

Partially offsetting the benefits of governments' substantial and consistent demand for vaccines is the resulting lower profitability because governments negotiate for relatively reasonable pricing. This is playing out in the race to develop a COVID-19 vaccine, because many players have pledged to offer one either at cost or at very low profit margins. That said, unique dynamics including wariness about being perceived as greedy by profiteering from the global pandemic and an effort to improve the industry's reputation are likely contributing considerations in this specific context.

Limited Pricing Power

The vaccine marketplace isn't only characterized by few sellers but also by few buyers. The large scale and concentration of these government and humanitarian-aid type buyers undermines more notable pricing power of sellers and leads to relatively low vaccine prices. Thus, despite the limited number of competitors, the market continues to function relatively efficiently, inspiring innovation and serving the common good at reasonable prices that provide an acceptable return to manufacturers.

Globalization may also increase industry competition. The world's largest manufacturer, in terms of the number of doses produced and sold annually, is the Serum Institute of India Pvt. Ltd. (not rated). It produces over 1.5 billion vaccine doses each year, but primarily distributes its products throughout the developing world at very low costs. It recently sought to expand its operations by complying with the highest international standards, as well as expanding its product portfolio. With a plant approved by the FDA for manufacturing pharmaceutical injections and a pipeline that includes an HPV vaccine, the Serum Institute could challenge the ability of GSK, Merck, Sanofi, and Pfizer to expand in the developing world, as well as pressure margins in the West. They also can serve as a CDMO, as is demonstrated by their partnership with AstraZeneca PLC and the University of Oxford to produce their COVID-19 vaccine candidate, even ahead of its approval.


Vaccine makers have been able to obtain better returns in recent years, more comparable to the broader pharmaceutical industry, on newer and higher-priced vaccines and combination products, aided by the long life of their products (beyond patent expiration) and less competition in the industry, leading to assertions of profiteering.

Nevertheless, prices remain well below the value of these products to users, and far below the per dose price of many branded drugs. For example, at a private sector cost per dose of around $227, on a three-dose regiment, Merck's Gardasil 9 (for HPV) is the most expensive vaccine on the market. However, only two other vaccines, Merck's ProQuad ($225/dose; measles, mumps, rubella and varicella) and Pfizer's Prevnar 13 ($202/dose; pneumococcal bacteria), exceed $200 per dose. Including these three, there are only 11 vaccines with a private sector dose above $100 in the U.S., according to the Centers for Disease Control And Prevention (CDC). Still, like much of the pharmaceutical market, prices and profits are much higher in developed countries. GSK sells their vaccines in Gavi-alliance countries for as little as one-tenth of their price in developed countries. Similarly, Pfizer sells Prevnar 13 for as little as $3.05/dose to Gavi countries, while Merck sells an earlier version of Gardasil (Gardasil 4) for as little as $4.50/dose to Gavi countries.

Overall vaccine revenues seem to imply very modest average price per dose. For example, Sanofi provides over 1 billion vaccine doses each year, while GSK distributes over 700 million doses, suggesting an average revenue per dose of around $6.30 for Sanofi, and $12.85 for GSK, based on their 2019 vaccine revenues. In its recent announcement with Operation Warp Speed, the U.S. government announced it will pay Pfizer and BioNTech (not rated) $1.95 billion to produce and deliver 100 million doses of their COVID-19 vaccine if approved, putting the average cost at $19.50 per dose.

Appendix 2

Table 5

Various Vaccine Technologies
Vaccine technology Description Strengths Weaknesses
Whole-Virus Vaccines Created after a pathogen has been inactivated using chemicals or heat. Low risk of the virus becoming virulent and causing diseases after being introduced in the human body. (1) Provides low level of immunity, requiring several doses in order to achieve a certain degree of ongoing immunity against viral diseases. (2) Short span of protection; increased likelihood of boosters being needed for long-term immunity.
Replicating Viral Vectors Virus manipulated to prevent replication at full capacity, allowing the natural immune system to rid the viral vector from the body. (1) Can be administered with low dosage mucosal delivery. (2) Provides persistent immunity. (3) Genetically stable. Safety concerns for those patients having low immunity.
Non-Replicating Viral Vectors Each vaccine dose contains millions of viral vectors that were manipulated to prevent replication. (1) Vaccines usually have good physical and genetical stability. (2) Does not require cellular integration, minimizing risk of mutations. (1) Requires administration in high doses to elicit an immune response. (2) Production is difficult.
mRNA (Messenger RNA) Uses an mRNA sequence to instruct cells to build a disease-specific antigen, in order to help the immune system recognize and prepare to fight infected cells. (1) Non-infectious; does not use pathogen particles or inactivated pathogens. (2) Good tolerance among healthy individuals, generating a reliable immune response and few side effects. (3) Rapid, mass production possible in the laboratory. (1) Could lead to unintended effects: The mRNA strand has the potential to elicit unintended immune reaction. (2) Effective delivery to the target cell can be challenging since the body breaks down free RNA very quickly. (3) Requires ultra-cold refrigeration in order to be stored.
DNA Comprised of bacterial plasmids with vaccine inserts, a process done using recombinant DNA technology. (1) Rapid and large-scale production possible at considerably lower costs. (2) Easy manipulation of coding sequences requiring administration of a single dose encoded to target several proteins or antigens. (3) Better stability at higher temperatures (1) DNA plasmids persist long-term upon application, increasing integration risk and threat of cell mutations. (2) Possible for immune system to produce antibodies against the injected DNA. (3) DNA vaccines are rendered useless against certain microbes.
Protein-based Comprised of protein antigens purified from the pathogenic organism or produced within a system such as yeast or bacteria. (1) Well established commercial products targeted towards treating bacterial diseases. (2) Produces more targeted responses by the immune system (3) Eliminates the risk of active infections associated with incomplete inactivated vaccines or live attenuated vaccines. Complex manufacturing process involving requirement of multiple components.
Sources: S&P Global Ratings, company reports.

This report does not constitute a rating action.

Primary Credit Analysts:Patrick Bell, New York (1) 212-438-2082;
David A Kaplan, CFA, New York (1) 212-438-5649;
Secondary Contacts:Arthur C Wong, Toronto (1) 416-507-2561;
Tulip Lim, New York (1) 212-438-4061;
Marketa Horkova, London (44) 20-7176-3743;
Nicolas Baudouin, Paris (33) 1-4420-6672;

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