PremiumCovid-19 vaccines have turned out to be high-margin products for manufacturers. With the coronavirus continuing to be around, vaccine demand remains brisk, and their manufacturers are bracing for another record year of revenues and profits.
The rapid spread of the Omicron variant of the virus that causes covid-19 is turning the focus on booster vaccine doses, as well as expanding vaccinations to new groups such as children. The primacy of vaccines to combat the pandemic also means the massive financial windfall for jab manufacturers in 2021 looks set to extend into 2022.
Serum Institute of India (SII), which makes Covishield in India, earned revenues of ₹13,288 crore in the six-month period ending September 2021, said credit rating agency CARE Ratings. That’s 80% more than its revenues in all 12 months of 2020-21. While its latest net profit is not available, an operating profit of ₹8,324 crore points to a healthy net surplus.
Covishield accounts for 87% of the 1.5 billion covid-19 vaccine doses given by India. During this public health emergency, the Centre, when it was the only buyer, negotiated a price of ₹150 per dose with SII. This was revised to a three-tier pricing: ₹150 for the Centre (raised to ₹215 later), ₹400 for states (lowered to ₹300 later) and ₹600 for private hospitals. A bulk of Serum’s numbers are based on this three-tiered pricing.
Similarly, Pfizer, the first to launch a covid-19 vaccine in the US, has seen its revenues and profits surge. In 2020, it averaged quarterly revenues of $10.5 billion and net profit of $2.2 billion. In 2021, this shot up to $19.3 billion and $6.2 billion, respectively. Given the continuing presence of covid-19, Pfizer and others are looking at a similar windfall in 2022.
Covid-19 Boost
Pfizer’s early, and risky, call to develop a covid-19 vaccine has paid off handsomely. For the nine-month period from January to September 2021, the latest available, its revenues have nearly doubled over the corresponding period a year ago. As much as 87% of this increase came from its vaccine division, predominantly the covid-19 shot. In the September 2021 quarter, Pfizer’s covid-19 vaccine earned $13 billion of revenues. Its next bestsellers were pneumococcal vaccine Prevnar and cancer drug Ibrance ($1.4 billion each).
Pfizer’s covid-19 vaccine revenues in the September 2021 quarter exceeded the company’s entire revenues in the September 2020 quarter. In other words, in just 12 months, Pfizer has built a stream greater than all other revenues of the 173-year old company. While Pfizer has given about 40 million doses on a not-for-profit basis to vaccine pacts targeted at low-income nations, much of the Pfizer vaccine has been sold on commercial terms ($19.50 per dose, or about ₹1,500).
Stock Appreciation
Even with this windfall, Pfizer is not the best-performing stock among covid-19 vaccine manufacturers. Since 1 January 2020, the Pfizer stock is up a healthy 62%. By comparison, Moderna, another leading manufacturer of the covid-19 vaccine in the US, has delivered an 11-fold appreciation in share prices. BioNTech, Pfizer’s partner in making its covid-19 vaccine, has seen a 5.5-fold gain.
The growth effect of the covid-19 vaccine on the revenues of these smaller companies is far greater than on Pfizer. According to Yahoo Finance, Moderna’s revenues for the trailing 12 months are about 15 times its 2020 revenues. For BioNTech, that multiple is 29. Both have gone from making losses to becoming immensely profitable. In India, even SII has seen its operating margin increase from about 55% in 2019-20 to 61% in 2020-21, according to CARE Ratings. The latest financials for Bharat Biotech, also an unlisted company, were available only for 2019-20.
Double the Demand
The CARE Ratings document for SII, dated 14 December 2021, says the company’s order books are full for the next three years. Further, it expects the company’s profit margins to increase further with more exports. According to the World Health Organization, as of 7 January, there were 137 covid-19 vaccines in clinical development and 194 in pre-clinical development.
Demand is brisk, fuelled by vaccine inequity and, now, calls for booster doses. According to Our World in Data, only 10% of Africa has received two doses, against 58% in North America and 62% in Europe. Even before the Omicron variant took hold, 10 leading manufacturers of vaccines globally were projecting production of twice as many vaccine doses in 2022 as compared to 2021. Leading them were Sinophram of China, Pfizer and Moderna. Unless governments impose price caps, expect the financial windfall to continue.
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