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Pfizer and Moderna investors gird for eventual drop in vaccine sales

Pfizer and Moderna developed their Covid-19 vaccines at unprecedented speed, dominating the global market for jabs and sending their share prices to record highs.

But as the landscape shifts from a pandemic to being endemic in the developed world, Wall Street analysts say the drugmakers will have to manage investors’ expectations for future sales of their jabs and a slide in their share prices.

Shares in Pfizer, which developed its vaccine in partnership with BioNTech, hit record highs this summer as the debate around the need for boosters intensified and countries including the US and UK planned to deliver third doses in the autumn.

Yet some analysts caution that Pfizer, which is valued at more than $250bn, will not replicate the blockbuster vaccine sales it has had this year, and that the company will have to manage a share price decline beyond 2023, at which point most of the developed world is expected to have received a third shot.

“The market is pricing in as if these companies are going to be doing $20bn per year every year almost indefinitely,” said Cory Kasimov, biotechnology analyst at JPMorgan. “The share prices of these vaccine companies are being driven more by momentum and headlines relating to variants, boosters, full approval, and not to fundamentals.”

In a recent note, JPMorgan said Pfizer’s Covid vaccine sales are “unlikely to be sustainable anywhere near current levels longer-term”, while SVB Leerink analysts “see limitations in [Pfizer’s] growth prospects due to competitive pressures”.

Few analysts expect annual revaccination to be required for everyone, instead predicting that only elderly people or those with weakened immune systems are likely to need annual boosters beyond 2022 — a small group that will generate a fraction of the vaccine sales recorded this year.

“It’s increasingly likely that a pretty wide group of folks get a third booster in the near term, the next 8 to 12 months,” said Damien Conover, director of equity strategy at Morningstar. “It’s less clear if everyone needs boosters going forward. There’s an important distinction between a third booster and an annual booster.”

On Wednesday, Pfizer reiterated the need for boosters after presenting data showing the vaccine’s protection declined six to eight months after the second dose.

Bar chart of Revenue ($bn)  showing Pfizer's Covid vaccine sales overshadow other top products

Revenues from the Covid vaccine dwarfs Pfizer’s other “blockbuster” products — drugs with annual sales in excess of $1bn — including blood thinner Eliquis and cancer medicine Ibrance. Although the company does not break out profits for individual products, it said it expected to generate a percentage profit margin in the “high-20s” from sales of its Covid vaccine in 2021.

And while the country has multiple contracts with governments for 2022, the company will face increased competition in the years to come, including from later entrants to the market such as Novavax.

In a sign that the Covid vaccine market is evolving to become similar to the conventional US drug market — with pharmaceutical companies pumping out advertising to entice patients and doctors — Pfizer and Moderna are hiring new staff to promote their jabs. Last month, Pfizer recruited a salesforce to advertise its booster shot while Moderna is also expanding its US marketing team.

“As we move into the next couple of years there’s a whole wave of vaccines that are likely going to be approved — GSK, Sanofi, and a lot of other players,” Conover said, noting that Pfizer will struggle to significantly raise prices if it wants to compete.

“The flu shot is available every year but only a minority of patients get it,” said Vamil Divan, senior healthcare analyst at Mizuho. “A good percentage of the country isn’t vaccinated yet so when it’s endemic it will be even less. [Sales] won’t be anywhere near what we saw this year.”

He expects Pfizer’s Covid vaccine sales to hit $16.3bn next year but then halve to $8.3bn in 2023 and decline to $2bn in 2024. 

Additionally, patents on several of Pfizer’s best-selling medicines including Ibrance and Eliquis, are set to expire in 2026 and 2027, which could further weigh on overall revenues.

Pfizer said across its entire portfolio it expected “at least 6 per cent revenue growth, on average, per year through and including 2025”.

“While our efforts in developing Covid-19 vaccine may play a longer-term role in the growth of Pfizer, the company remains focused on delivering positive clinical trial results for its late-stage pipeline opportunities,” the company said.

For Moderna, the forthcoming revenue cliff will be even more pronounced. Its Covid vaccine is the company’s only approved drug, and the success of that single product has propelled the biotech group to a $175bn market capitalisation.

Line chart of Share price ($) showing Moderna's Covid vaccine success has sent its shares soaring

Last week the drugmaker unveiled an ambitious array of drug development programmes using mRNA technology, which it hopes to deploy to treat diseases ranging from cancer to heart disease. But the vast majority of its pipeline is still in the very earliest stages of testing and most experimental drugs fail.

“One of their struggles is going to be that investors are going to look for the next big thing,” said Hartaj Singh, senior biotechnology analyst at Oppenheimer. “If their pan-respiratory programme doesn’t start producing some products over the 2024 timeframe, you’re going to start seeing some pain to the share price,” he said referring to Moderna’s plans to develop one vaccine targeting several respiratory diseases including flu and Covid-19.

Moderna declined to comment on its valuation.

Singh said Moderna’s share price “could get as much as cut in half” and compared it to US drugmaker Gilead, which in 2015 received approval for its hepatitis C drug — the first effective cure for the disease. After patients completed their course of treatment, they did not need to take the drug any more, and the medicine eventually faced stiff competition from rivals.

The rise and fall of Gilead’s market capitalisation, which stands at $90bn today compared with $173bn at its peak in 2015 has become a cautionary tale for pharmaceutical companies that rely heavily on sales of a single product.

One pharmaceutical investor said “the same dynamics” that affected Gilead were at play in the Covid vaccine market. “It is extremely difficult once you have this big success from a single product. Wall Street is pretty brutal and they don’t give a lot of value for what they feel is a limited duration [on a product].”


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