Drug makers have long been viewed unfavourably by the public, with the pharmaceutical industry being rated the most hated industry in the US according to a 2019 poll by Gallup, an analytics company known for public opinion polls (see Figure 1). Historically, companies have been blamed for charging extortionate prices for life-changing drugs, as well as other unethical behaviour such as profiting from the opioid crisis. With the development of a new COVID-19 vaccine comes the chance to improve public percepition of global pharmaceutical companies and the potential to raise money for future projects from investors and governments.
Figure 1. Americans’ net favourability of the pharmaceutical industry over time. Gallup.
Leading pharmaceutical companies were initially reluctant to pursue a vaccine, as the process looked to be hostile. It seemed a challenging project, with the pressure of working towards an exceptionally tight deadline, huge public scrutiny, and no security of profits in the end. Previous experience, such as with the Zika virus, had shown that producing a vaccine could be an unprofitable venture. However, two main factors drove many pharmaceutical companies to take the risk with COVID-19: the extent of the crisis, which made vaccine production inevitable, and the extraordinary levels of public funding.
There are now 202 companies developing COVID-19 vaccines, and 47 products are in clinical trials. Pfizer and BioNTech recently published data suggesting that the vaccine they had developed together offered 95 per cent protection against COVID-19 and they have submitted an emergency authorisation request in the US. Following the initial announcement of the trial’s success, shares in Pfizer and BioNTech rose 7.7 per cent and 13.9 percent respectively.
Furthermore, Moderna followed suit shortly after, declaring similar results from clinical trials. As a relatively new company founded in 2010, it has experienced significant growth with shares rising by more than 420 per cent since it went public in 2018. The news about the vaccine pushed up share prices by another 10 per cent, adding to what has already been a prosperous year, illustrated by Figure 2. A successful vaccine could be a turning point for newer companies like Moderna which have never previously brought vaccines to market, as it could help secure investment and regulatory approvals for other parts of their vaccine portfolio.
Figure 2. Moderna stocks over the last year. Financial Times.
There is a split between drug makers with regards to whether or not they will profit from a COVID-19 vaccine. AstraZeneca and Johnson & Johnson are among those who have pledged to not make a profit for the time being, although they will most likely adopt a value-based pricing approach as soon as next year. Meanwhile, Pfizer and BioNTech will generate a profit immediately once their vaccine goes to market and stand to make 9.8 billion GBP collectively next year from the vaccine. Industry experts believe that the future market for COVID-19 vaccines could be worth more than 10 billion USD in annual revenue for pharmaceutical companies, as many scientists believe that the virus will become endemic. Pharma companies may also benefit from another aspect of the COVID-19 vaccine that differentiates it from standard vaccines: governments have already established deals with companies to develop, manufacture and distribute vaccines, so while it usually costs drug makers significantly to bring their products to market, this will not be the case for the COVID-19 vaccine as public interest has already been generated.
The main advantage of producing a COVID-19 vaccine for Big Pharma may not be the direct impact of sales, but rather public credit. It is vital for pharma firms to win popularity with the public, as this will influence policies put in place to regulate drug sales, which could have a significant impact on profit margins. Finding an effective vaccine could help pharmaceutical companies in their campaign to fend off government efforts to more heavily regulate the industry, resulting in a long-term victory for Big Pharma. Not least of all, the vaccine will play a crucial role in public health and the global economy.
By Hortense Comon
Sector Head: Hermione Scott