Why AstraZeneca May Dominate the Coronavirus Vaccine Market

All eyes have been on the leaders in the coronavirus vaccine race these past few weeks. So far, Moderna (MRNA 3.01%), Pfizer (PFE 1.00%), and AstraZeneca (AZN 2.31%) have reported efficacy data from phase 3 trials. The U.S. Food and Drug Administration (FDA) will use this information, along with safety results, to determine which players will receive Emergency Use Authorization (EUA).

Though all three companies announced positive results, AstraZeneca's performance lagged behind that of its two rivals. Pfizer and Moderna reported 95% efficacy and 94.5% efficacy, respectively. One dosing regimen in AstraZeneca's trial produced 90% efficacy -- but the average of its two tested dosing regimens only showed 70% efficacy. Yet this big pharma player still may take the largest share of the market. "How can that be?" you might ask. Well, a few elements may push AstraZeneca ahead.

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During the pandemic, AstraZeneca promised to sell its coronavirus vaccine without taking a profit. At the price negotiated with the U.S. government, AstraZeneca is offering the potential vaccine for $4 a dose. (That compares with $15 for Moderna, and about $20 for Pfizer, if we use figures from their deals with the U.S.)

The no-profit pledge

According to announced vaccine supply deals, AstraZeneca surpasses its rivals. It's likely that the company's no-profit pledge worked in its favor as countries and organizations considered various vaccine makers. AstraZeneca was the first company to sign a supply deal with the European Commission. That was back in August. AstraZeneca will provide 400 million doses to the region at no profit. The European Commission this month signed supply deals with Pfizer and Moderna after months of negotiation. Terms of these agreements weren't released.

Of course, some governments may eventually turn to the product with the best efficacy. And at that point, AstraZeneca may lose some customers. But it's clear that affordability may be the priority for others. Some of AstraZeneca's earliest deals were with initiatives that aim for broad access to vaccines. For example, through a licensing agreement with the Serum Institute of India, AstraZeneca will provide one billion vaccine doses for low and middle-income countries. AstraZeneca also will supply 400 million doses to Europe's Inclusive Vaccines Alliance.

AstraZeneca hasn't spoken of how much profit it will take after the pandemic. But if the price stays lower or on par with rivals, and customers are satisfied with results, the company may maintain its status as top supplier.

Three billion doses

Capacity should also help AstraZeneca. The company is ramping up to provide three billion doses on a rolling basis next year. Moderna's capacity stands between 500 million and one billion doses next year. Pfizer aims to produce 1.3 billion doses during that time. The closest to AstraZeneca in terms of capacity is Novavax (NVAX 2.52%). The biotech, which expects to report phase 3 data in the first quarter, is preparing to make two billion doses by mid-2021.

Considering the worldwide need for a vaccine, there is room for all of these vaccine makers. But if AstraZeneca's rivals don't expand production capacity, AstraZeneca is on track to be the biggest supplier -- for this reason alone.

Your refrigerator's temperature

And finally, the nature of AstraZeneca's vaccine candidate also offers it an edge. The investigational vaccine may be transported and stored at your refrigerator's standard temperature for about six months. That makes it easy to administer at various healthcare settings without an investment in additional supplies. The candidates of Moderna and Novavax offer this advantage too. But Pfizer's investigational vaccine requires ultra-low storage temperatures. That means many healthcare settings must invest in special freezers -- or forego the Pfizer option.

All of these elements mean that AstraZeneca -- in spite of its efficacy reading -- is likely to dominate the coronavirus vaccine market. If the vaccine candidate is authorized or approved by the FDA, AstraZeneca says it's "immediately" preparing submissions to regulatory agencies worldwide that offer emergency authorization.

AstraZeneca is a solid pharmaceutical company to add to your portfolio. But I don't expect leadership in coronavirus vaccines to offer revenue (remember the no-profit pledge) any time soon. Possible EUA news could offer the shares a lift. But like other big pharmas, AstraZeneca's shares are less reactive to coronavirus vaccine news than those of clinical stage biotech companies. Why? The biotechs will depend on coronavirus vaccine sales for revenue; big pharma companies won't.

AstraZeneca share growth will happen over time, driven by the company's entire portfolio of marketed products.