Moderna (NASDAQ: MRNA) and Pfizer (NYSE: PFE) have quickly developed highly effective vaccines that should help to end the Covid-19 pandemic. With Pfizer’s vaccine already rolling out in the U.K, and the U.S. in limited quantities, and Moderna’s likely to follow suit in the coming weeks, investors are likely trying to figure out the financial impact of these shots. Although this is a touchy subject at the time of a global pandemic, both Moderna and Pfizer have indicated that they would be making a profit on their vaccines, unlike Johnson and Johnson and AstraZeneca, who have indicated that they would sell vaccines at cost through the pandemic. So how profitable will the vaccines be for the two companies?
While it’s difficult to arrive at the margin figures at this point, given the manufacturing and development partnerships involved and variable pricing of the vaccines, it’s likely that the vaccines will be lucrative for a couple of reasons. Firstly, both Moderna and Pfizer use a new technology called mRNA, which is likely to offer meaningful cost benefits compared to traditional vaccines, as the manufacturing process is less capital intensive and relatively simpler and the doses are usually small. (see our note on mRNA manufacturing below). Secondly, both vaccines are more expensive than rivals. Pfizer’s vaccine will be priced at about $19 per dose, based on a supply agreement with the U.S. government, while Moderna’s shot will be priced at as much as $37 per dose. In contrast, the AstraZeneca vaccine is expected to be priced as low as $4. Both companies have also built relatively large order books for their vaccines, giving them the scale required to bring costs down. Pfizer’s shot has about 1.3 billion pre-orders so far, while Moderna’s shot has about 800 million pre-orders.
See our interactive dashboard on How Will The Covid-19 Vaccine Impact Moderna’s EPS? for more details on how the vaccine is likely to impact Moderna’s bottom line. You can modify key variables including price per shot, the number of doses, and margins to arrive at your own estimates.
[Updated 12/10/2020] Can Moderna Rise To The Manufacturing Challenge
As we’ve said before, Moderna’s Covid-19 vaccine is likely to emerge as the most sought after vaccine in developed markets, considering its stellar efficacy rates and relative ease of storage. So how is the company going to meet demand? While Moderna intends to produce between 500 million to 1 billion doses of its vaccine over 2021, it has no real manufacturing track record and has never produced or sold a commercial drug to date. However, there are a couple of factors that could help the company scale up quickly.
Moderna’s vaccine uses messenger RNA (mRNA) technology – which has never been used in a vaccine before but could be easier to scale up. Unlike traditional vaccines which use a virus protein that needs to be grown over the course of weeks, mRNA molecules – which instruct the body to produce virus proteins by itself – are less complex and are produced via a chemical process (rather than a biological process) making mass production much quicker. 
Moderna is working with multiple partners to produce its vaccine. Switzerland-based Lonza, one of the world’s largest pharmaceutical services companies, will produce the key mRNA active ingredient for the vaccine in New Hampshire and Switzerland. Germany’s CordenPharma will produce the lipids – which are used to deliver the mRNA. The vial filling and packaging will be handled by Catalent, a contract manufacturing company. That being said, some hiccups are to be expected as the company works with a tight timeline. For instance, even Pfizer, which also uses mRNA technology and has an established manufacturing base, had to halve its initial vaccine production target for this year to 50 million doses due to some supply chain constraints. 
See our indicative theme of Covid-19 Vaccine stocks – which includes U.S.-listed pharma and biotech companies. The theme is up by about 877% year-to-date versus about 14% for the S&P 500.
Moderna (NASDAQ: MRNA) published final results from its 30,000-person phase 3 trial of its Covid-19 vaccine and indicated that it would apply for emergency use authorization with the U.S. FDA. The vaccine was over 94% effective in preventing Covid-19 and 100% effective in preventing severe cases of infection – meaning that no one who received the vaccine developed a serve case of the infection. Investors cheered the news, sending Moderna stock up by about 20% on Monday’s trading. The stock has more than doubled over the last month as the company began publishing efficacy data. Is this jump warranted? We think it largely is, but there are some risks as well.
Moderna’s Covid-19 vaccine could emerge as the most sought-after vaccine, particularly in developed markets – considering the high levels of efficacy as well as manageable refrigeration requirements, unlike Pfizer’s candidate which is also highly effective but needs to be stored at ultra-cold temperatures. The vaccine is likely to be priced at between $25 to $37 per dose, with two doses required per person. We estimate that the vaccine will add roughly $6 to Moderna’s EPS each year over 2021 and 2022. (related: How Will The Covid-19 Vaccine Impact Moderna’s EPS?) While Moderna’s stock trades at about $150 per share, its valuation still looks reasonable at about 25x our projected 2020 EPS. That’s below the S&P 500 that trades at about 26x projected earnings.  However, it should be noted that sales of the vaccine will be significantly front-loaded. There is a lot of competition in the race for a Covid-19 vaccine, and it’s likely that there will be multiple successful candidates from other companies. Once a large percentage of the global population is vaccinated (likely by 2022 or 2023) the earnings potential of the Covid vaccine will diminish.
While the EPS impact of the Covid-19 vaccine could be fleeting, the validation of Moderna’s messenger RNA (mRNA) technology could be far more consequential for investors. mRNA offers significant flexibility with vaccine and potentially drug development. Once the genetic code of a virus is available, Moderna essentially adapts messenger RNA to trigger the immune system to produce protective antibodies without using the actual part of the virus, unlike traditional vaccines. For perspective, the Covid-19 vaccine was apparently designed within a few days.  The speed and the efficacy of the Covid vaccine also indicate that Moderna could leverage this technology to develop new lines of vaccines against a variety of viruses.
That said, Moderna’s success with Covid doesn’t guarantee that its vaccines and therapeutics in other areas, such as cancer, will be as effective. For example, not all viruses are similar to Covid, which mRNA might be better at mimicking. mRNA-based Covid vaccines focused on the novel coronavirus’ spike protein – which is on the outside of the virus – but there are other viruses whose harmful regions are hidden, making it more difficult for mRNA to address.  There could be challenges in areas such as Immuno-Oncology as well, where Moderna is betting big. If Moderna’s success is for some reason limited to certain infectious disease vaccines, its long term outlook might not be as promising, given the lower margins that vaccines typically command.
[11/27/2020] What’s Happening With Moderna Stock?
Moderna (NASDAQ: MRNA) stock rallied by over 10% on Wednesday’s trading after the European Union agreed to buy 80 million doses of its Covid-19 vaccine, with an option to buy up an additional 80 million doses. The company already has supply agreements with the U.S., Canada, Japan, the U.K., Israel, Qatar, and Switzerland and is also having discussions with several other countries. There are a couple of reasons why Moderna’s vaccine is much sought after.
While there are two other vaccines by drug majors Pfizer and AstraZeneca that have reported phase 3 results, it looks like Moderna’s vaccine offers the best balance of efficacy and ease of storage and distribution. Pfizer’s vaccine is about 95% effective based on phase 3 data, but it needs to be stored at extremely cold temperatures of minus 94 degrees Fahrenheit, calling for specialized freezers. AstraZeneca’s vaccine, on the other hand, faces concerns regarding some gaps in its trial data, which could undermine its reported results.  Moderna’s vaccine offers an efficacy that’s similar to Pfizer’s and can apparently be stored at refrigerator-like temperatures for 30 days.
There are still some concerns though. Firstly, supply will remain an issue in the near-term. Moderna indicates that it could have about 20 million doses of its vaccine ready by this year and expects to produce between 500 million to 1 billion doses next year in collaboration with Switzerland-based Lonza. Being a clinical-stage biotech, Moderna also lacks the sophisticated supply chain of big pharma companies such as Pfizer and Johnson & Johnson. Moderna’s vaccine will also be more expensive than rivals, as it is likely to cost between $25 and $37 per dose, depending on the volume of the order, compared to about $19 per dose for the Pzifer vaccine.
See our indicative theme of Covid-19 Vaccine stocks – which includes U.S.-listed pharma and biotech companies. The theme is up by about 721 % year-to-date versus about 13% for the S&P 500.
[Updated 11/17/2020] What The Covid Vaccine Means For Moderna Stock
On Monday, Moderna (NASDAQ: MRNA) stock rallied by over 10% after the company said that its Covid-19 vaccine – which is based on messenger RNA technology – was 94.5% effective based on preliminary data. Investors have good reason to be optimistic about Moderna for multiple reasons. Firstly, the efficacy compares favorably with Pfizer’s Covid vaccine, which reported efficacy of 90%. Although the number could change as more data comes in, it is nevertheless indicative of a highly effective vaccine. Secondly, Moderna’s vaccine should be easier to distribute compared to Pfizer’s, as it can likely be stored at refrigerator-like temperatures for 30 days, unlike Pfizer’s vaccine which requires much colder temperatures of around -94 degrees Fahrenheit – limiting its use to more developed parts of the world. Overall, Moderna’s vaccine could offer the best of both worlds – high effectiveness and easier logistics, although it could be slightly more difficult to manufacture compared to Pfizer’s. (related: How Will The Covid-19 Vaccine Impact Moderna’s EPS?)
More importantly for Moderna investors, the vaccine’s results also bode well for the rest of the company’s pipeline, which is entirely based on mRNA technology which has never been used previously in commercial drugs. The strong efficacy and the speed at which the vaccine was developed should essentially reduce the perceived risk surrounding the rest of Moderna’s pipeline of 21 vaccines and therapies for rare diseases. (related: A Look At Moderna’s Pipeline Beyond The Covid Vaccine)
See our indicative theme of Covid-19 Vaccine stocks – which includes U.S.-listed pharma and biotech companies. The theme is up by about 640% year-to-date versus about 13% for the S&P 500.
[Updated 11/11/2020] Why Pfizer’s Vaccine Data Is Good News For Moderna
While Pfizer‘s (NYSE: PFE) surprisingly strong initial Covid-19 vaccine efficacy readout likely marks the beginning of the end of the Covid-19 pandemic, it probably doesn’t mean too much for Pfizer stock, given the limited potential profits and challenges with distribution. In fact, we think that the strong data from the vaccine – which is developed using messenger RNA (mRNA) technology could actually mean a lot more for Moderna (NASDAQ: MRNA), another Covid-19 vaccine player, whose entire drug pipeline is based on mRNA technology.
While messenger RNA (mRNA) based vaccines were touted to be more potent and quicker to deploy compared to traditional vaccines, they have never been used commercially to date. Now the initial data from Pfizer and its German partner BioNtech’s Covid-19 vaccine appears to confirm this, with the vaccine’s efficacy standing at 90% based on initial data, versus the U.S. FDA’s baseline efficacy requirement of just 50% for the approval for Covid-19 vaccines. The vaccine will also be the first to seek emergency use approval from the FDA. While Moderna has a Covid vaccine of its own in the works, with efficacy data expected any time now, the strong response of Pfizer’s mRNA bodes well not just for Moderna’s Covid efforts, but also for the rest of the company’s sizable pipeline which is focused mostly on vaccines and therapies for rare diseases. The company has 21 programs underway, around 13 of which are in the clinical stage. Moderna’s Cytomegalovirus (CMV) vaccine, which is currently in phase 2 studies and could move to phase 3 in 2021, is likely to be the company’s first candidate for approval after its Covid-19 vaccine.
See our indicative theme of Covid-19 Vaccine stocks – which includes U.S.-listed pharma and biotech companies. The theme is up by about 540% year-to-date versus about 10% for the S&P 500.
[Updated 11/10/2020] What Does Pfizer’s Vaccine Readout Mean For Its Stock?
Pfizer (NYSE: PFE) and its German partner BioNTech indicated that their Coronavirus vaccine, dubbed BNT162b2, was over 90% effective at preventing Covid-19 infections among volunteers, based on early data from phase 3 trials. The results are surprisingly strong, considering that the U.S. FDA had set a baseline efficacy of just 50% for the approval for Covid-19 vaccines. While there is a possibility that the efficacy rate of Pfizer’s vaccine could change as more data comes in, the numbers are no doubt encouraging. The companies are on track to file an emergency use application with the U.S. FDA later this month if pending data indicates that the vaccine is safe.  The companies intend to manufacture up to 50 million doses this year, and as much as 1.3 billion doses in 2021. Two shots of the vaccine will be required per person.
While Pfizer stock was up by almost 8% following the news, we think it’s unlikely that the vaccine will meaningfully move the needle for the company for multiple reasons. (Related: Are Covid Vaccine Stocks Worth Investing In?) For perspective, Pfizer has agreed to supply the U.S. government with the vaccine at about $19.50 per dose, and it’s possible that average prices could be well below this, considering that pricing might be lower in emerging markets. Also, vaccines traditionally have lower profitability versus prescription drugs. Combined with the large public interest in facilitating vaccine access, these margins may face even more downward pressure. Considering that the vaccine is co-developed with BioNTech, any profits will likely be shared.
Competition is also likely to mount as there are likely to be several more successful vaccine candidates from other companies in the coming quarters. For example, clinical-stage biotech Moderna (NASDAQ: MRNA), which also uses an mRNA-based technology like the Pfizer vaccine, is slated to report efficacy data in the coming weeks. (related: How Will The Covid-19 Vaccine Impact Moderna’s EPS?) Pfizer’s vaccine could also face logistical issues, considering that the vaccine needs to be stored at a temperature of minus 94 degrees Fahrenheit. On the other hand, vaccines being developed by the likes of Oxford- AstraZeneca, Novavax, and others can be held at regular refrigerated temperatures. This could potentially limit the use of Pfizer’s vaccine to clinics and hospitals that have the appropriate storage facilities.
[Updated 11/4/2020] Covid-19 Vaccine stocks
Our indicative theme of Covid-19 Vaccine stocks – which includes a diverse set of U.S.-based pharma and biotech companies developing Covid vaccines – is up by about 560% year-to-date, on an equally weighted basis, compared to the S&P 500 which has gained just about 4% over the same period. While most vaccine stocks declined last week, amid a broader sell-off in the markets, they are likely to come back into the spotlight as efficacy data from late-stage trials is expected from frontrunners Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA) in the coming weeks. Below is a bit more on the companies in our theme of Coronavirus Vaccine stocks and their relative performance.
Novavax (NVAX), a vaccine development company, began late-stage trials of its Covid vaccine in the U.K in September, and large-scale phase 3 trials are due to begin in the U.S. and Mexico this month. While the company doesn’t have any other products on the market yet, its flu vaccine NanoFlu could be ready for potential FDA approval. The company has received about $1.6 billion in funding from the Federal government. The stock has soared 2,000% year-to-date.
Moderna (MRNA) , a clinical-stage biotech company, is carrying out phase 3 trials of its Covid-19 vaccine, completing enrollment of 30,000 participants. The company is likely to have data on whether its vaccine works or not by this month, and has noted that it would seek emergency approval from the FDA if the vaccine is at least 70% effective. The stock is up 253% this year.
Johnson & Johnson (JNJ): Unlike most other vaccine candidates, which are likely to require two shots, J&J is targeting a single-dose vaccine. While the company had to pause trials in mid-October after an illness was reported in a volunteer, the company is now preparing to resume trials. The stock is down by -5.1% this year.
Pfizer (PFE) is working with German partner BioNTech on a Covid-19 vaccine. The company is likely to have efficacy data from late-stage trials available shortly. The company could supply about 40 million doses in the United States in 2020 if the data is positive and regulators approve the vaccine. The stock is down by about -7.6% this year.
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- How mRNA vaccines from Pfizer and Moderna work, The Conversation [↩]
- WSJ [↩]
- WSJ [↩]
- Moderna’s Covid-19 vaccine was designed in just two days, CNN [↩]
- Pfizer-BioNTech COVID-19 vaccine data ‘open the floodgates’ for mRNA in infectious disease. Other areas? Not so fast: analysts, FiercePharma [↩]
- After Admitting Mistake, AstraZeneca Faces Difficult Questions About Its Vaccine, New York Times, November 25, 2020 [↩]