Some companies will make a lot of money from their COVID-19 vaccines – but not as much as they could

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While the development of a COVID-19 vaccine could generate billions of dollars for some pharmaceutical companies such as Pfizer, concerns about charges of exploitation of the pandemic will likely temper profits, experts suggest.“It doesn’t really make sense to profit from this pandemic,” said Tinglong Dai, associate professor of operations management and business analysis at the Carey Business School at Johns Hopkins University in Baltimore.

“This is the perfect time to [pharmaceutical companies] to develop their brand image, which will serve them well for longer term benefits. In the long run, what is really important to pharmaceutical manufacturers is brand value. So people trust Pfizer, for example. ”

Vamil Divan, senior biopharmaceutical research analyst 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 think it’s appropriate to recoup the investment they made. But I imagine they are reasonable about it, ”he said.

Pharmaceutical giant Pfizer and upstart biotech company Moderna, both of which have announced test results showing their coronavirus vaccine candidate to be 95% effective, have indicated they will derive some profit from their businesses.

Some companies say they won’t profit from the pandemic

However, some other companies, including Johnson & Johnson and AstraZeneca, have pledged not to benefit from their vaccine, although they have suggested it will be limited to time during the pandemic.

Stacie Dusetzina, associate professor of health policy at Vanderbilt University, said that for an industry that has not been popular with the public, this is an opportunity for pharmaceutical companies to come back in their favor, du less to some extent.

“I think they have a lot to gain if they don’t mess up,” she said.

Still, Dusetzina noted, “I’m sure everyone will make a lot of money. “

Pfizer could generate billions of dollars in vaccine sales, at least in the short term. (Bebeto Matthews / Associated Press)

It is difficult to determine exactly how much money. Michael Levesque, senior vice president of Moody’s Investors Service, said the very limited data would allow an accurate estimate.

“We believe the Pfizer vaccine will generate benefits for Pfizer in 2021, but we have not made an explicit estimate of this 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 vaccines in the world by 2021.

Using this data, Cinney Zhang, equity research analyst for Bloomberg Intelligence, calculated that by 2021, Pfizer and BioNTech could expect $ 24 billion in revenue. That would equate to $ 7 billion in profit for each business.

“It could be a godsend,” she said.

Meanwhile, Moderna, which has said it will charge between $ 25 and $ 37 per dose, could add nearly $ 30 billion to its revenue, estimated market analyst Peter Cohan, writing in Forbes.

Game changer for small businesses

For a small business like Moderna, the vaccine could definitely be a game-changer, Divan said. And while Pfizer examines significant revenue figures, “it doesn’t really change the trajectory” of the company.

Pfizer generates about $ 50 billion in revenue per year, with up to about $ 16 billion in profits, said Damien Conover, director of health equity research and equity strategy for the financial services firm. Morningstar.

The COVID-19 vaccine, he said, will likely mean a “pretty substantial windfall” for Pfizer. Some vaccines, even at very low prices, will generate billions of dollars, he said.

But the gross margins on those dollars will be well below the typical gross margin of a large pharmaceutical company, he said.

“I would probably phrase it: 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 think, would have a hard time convincing people to buy their vaccine for the $ 40 price they are going to charge up front. So I think even these more modest profit levels will decrease. ”

Pfizer’s profits, for example, could be affected by unforeseen expenses, Zhang said. Their vaccine should be stored at around -75 ° C, which means that increasing refrigeration costs could impact their results, she said.

Latecomers in the market

The benefits will obviously also depend on whether or not the vaccine is needed, which could also have an impact on vaccine manufacturers arriving late to market.

Some companies, including Johnson & Johnson, have pledged not to benefit from their vaccine for the duration of the pandemic. (Zeba Siddiqui / Reuters)

“It is certainly possible that some of them will reach the market too late to turn into meaningful opportunities, especially if the first [companies] are very successful and are widespread in the population, ”said Mr. Levesque.

“If there is no need for revaccination, this scenario is one where some of the players who come out a bit later may not have a lot of market opportunity. ”

However, if their vaccines prove to be more effective, easier to distribute, and if revaccinations are needed, there may be opportunities for others, he said.

« Not to mention if any of the major players see manufacturing or safety issues emerge later, ”he said.

“So it is too early to ultimately estimate who is more successful or to feel that a company will be left out entirely. It is still early days for anyone involved. “

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