The new coronavirus has swept across the world, killing nearly a million people and making more than 30 million sick. The effect on the global economy has been devastating even though the US stock market is ignoring the economy. As investors look for profitable investments in this era of Covid-19, vaccine makers come to mind. There are a hundred potential vaccines under development and several in trials in the final stage before getting approved. The question for investors is this: are Covid-19 vaccines a good investment?
How Profitable Are Vaccines?
Although the vaccines under development for preventing Covid-19 may save the world from the current pandemic, vaccines are not the best money-makers for pharmaceutical manufacturers. Boost Oregon provides a bit of insight with an article asking Aren’t Vaccines Just Moneymakers for Pharmaceutical Companies? The short answer is, no. They are not.
The total global sale of vaccines by all companies for all diseases is $24 billion a year. By comparison, the total sales of homeopathic remedies and supplements are $36 billion a year and the total sales of a single drug such as one for hepatitis C are $10 billion a year. Total sales of all medicines run to about $750 billion a year. All vaccines come to about 2% of big pharma sales and the Covid-19 vaccines will be only a part of all vaccine production.
How Long Will Covid-19 Vaccines Be Moneymakers?
Despite optimistic projections by the current administration, it will take two or three years to vaccinate enough people across the globe to reduce Covid-19 to a memory. Thereafter, the virus will either go away or become another yearly vaccine. In the first case, all profit from Covid-19 vaccines will be within the next two or three years. In the other case, Covid-19 vaccinations will become a yearly occurrence and part of the yearly vaccine production which is about two to three percent of big pharma sales.
Are Covid-19 Vaccines Good Investments?
For huge companies like Johnson & Johnson, Covid-19 sales will be a tiny part of their profit. For companies like Moderna, the profit will be more significant. But, as The Motley Fool notes, Moderna is absurdly overvalued and dangerous ahead of a market crash.
There is no doubt that Moderna’s technology and progress in its vaccine race are to be commended. The issue arises when one takes a closer look at the market opportunity for COVID-19 vaccines. Right now, there are about 15 experimental vaccines in phase 2 clinical trials, nine experimental vaccines in phase 3 clinical trials, and five vaccines with early approval despite lacking efficacy data. Moderna’s competitors, Pfizer and AstraZeneca, already have a combined manufacturing capacity to produce three billion doses of their coronavirus vaccine candidates next year. The world only needs about 15.6 billion doses of two-dose vaccines for global immunity, and that’s not taking into account affordability or delivery logistics.
The next problem comes from the monetization model of vaccines themselves. After vaccination, it is unlikely a patient will need another shot for an extended period of time, cutting off the possibility of mRNA-1273 to generate recurring annual revenue.
The point is that even the front-runners in the vaccine race will share only a part of the global market in which as many as half of the world population will either refuse the vaccine or not be able to afford it. These vaccines are wonderful investments for the well-being of the human race but not so good for safe and profitable investments.
Are Covid-19 Vaccines Good Investments? Slideshare Version