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Could a Supply Glut Sink COVID Vaccine Stocks?

By Keith Speights - Mar 19, 2021 at 6:04AM

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Here's why a supply glut could be on the way --and what the impact could be.

Yes, there can be too much of a good thing. At least that's true when you own shares of the companies making the good thing.

After a frantic race by drugmakers to develop COVID-19 vaccines, millions of people around the world have already been vaccinated. Millions more will receive vaccines over the next few months. Vaccine makers are cranking up their production to help bring an end to the global pandemic.

Looking ahead, though, there's a real possibility that more vaccines will be produced than are needed. Could a supply glut sink COVID vaccine stocks in the not-too-distant future?

Long rows of COVID-19 vaccine vials

Image source: Getty Images.

A glut on the way?

You might think it's silly to speculate about a potential supply glut. Right now, not everyone who wants a COVID-19 vaccine can get one. 

In the U.S., there are currently only three vaccines with Emergency Use Authorization (EUA). Pfizer (PFE 0.56%) and its partner BioNTech (BNTX 0.11%) were the first to win EUA, followed closely by Moderna (MRNA -0.92%)Johnson & Johnson (JNJ -0.98%) received EUA for its COVID-19 vaccine last month.

However, there are two other companies that have a good shot (no pun intended) at securing U.S. EUA in the near future. AstraZeneca (AZN 0.24%) already won authorizations from the U.K. and the European Medicines Agency. Novavax (NVAX -0.88%) also reported promising data from a U.K. late-stage study of its COVID-19 vaccine. The biotech's CEO thinks that it could potentially win U.S. EUA by May if the Food and Drug Administration (FDA) agrees to allow the U.K. data as a basis for regulatory filing.

A supply glut just might be in the cards. Here are the production projections for each of these companies:

Company

2022 Estimated Production (Doses)

Pfizer/BioNTech 3 billion 
Moderna 1.4 billion 
Johnson & Johnson 3 billion 
AstraZeneca 3 billion* 
Novavax 2 billion 
Total 12.4 billion

Data sources: Company public statements and press releases. *AstraZeneca's estimated production by end of 2021.

Johnson & Johnson's vaccine requires only a single dose. Therefore, its 3 billion doses would fully vaccinate 3 billion individuals. The rest of the vaccines require two doses. The combined total of 9.4 billion doses of these two-dose vaccines would fully vaccinate 4.7 billion individuals. 

Adding all of this up means that the estimated production of these five vaccines would be enough to vaccinate 7.7 billion people. The total world population is roughly 7.9 billion. So no worries about a glut, right? Not so fast.

We haven't included the five approved COVID-19 vaccines developed by Chinese drugmakers or the Russian vaccine. Nor have we accounted for the fact that vaccines in the U.S. and in many other major countries haven't yet been authorized for children below the age of 16 for the Pfizer/BioNTech vaccine and 18 for the other vaccines.

Remember, too, that there are other companies hoping to win authorizations for their experimental COVID-19 vaccines. The bottom line is that if current production estimates are correct, we're going to have more-than-enough doses to fully vaccinate everyone in 2022.

Hurt the worst

You might wonder why a supply glut would be problematic for vaccine makers. The answer lies with the law of supply and demand. When supply greatly outstrips demand, prices fall, and that translates to lower revenue.

There are three biotech stocks that would almost certainly be hurt the most by a COVID-19 vaccine supply glut -- BioNTech, Moderna, and Novavax. It's no coincidence that they're the smallest among the leading vaccine makers.

The problem for these three companies is that they are or potentially will be solely dependent on their COVID-19 vaccine sales to generate revenue. Novavax is in the best shape to win approval for another product since it's already reported positive late-stage results for flu vaccine NanoFlu. However, it's uncertain how quickly the biotech will move forward with seeking regulatory approval for the vaccine candidate.

Bigger drugmakers such as AstraZeneca, Johnson & Johnson, and Pfizer wouldn't be negatively impacted as much by an imbalance in COVID-19 vaccine supply and demand. Each of these companies has multiple other products that are growth drivers. Of the three, Pfizer would likely be affected the most because it's making a profit on its COVID-19 vaccine, while AstraZeneca and J&J are selling their vaccines at cost during the pandemic.

Don't jump the gun

I wouldn't worry too much at this point that a supply glut could sink COVID vaccine stocks. Why? The companies will almost certainly curb their production if they anticipate that the demand won't be sufficient to keep up with supply.

However, the COVID-19 vaccine market will become more competitive over time. The stocks of companies that can deliver the safest, most effective, and most convenient vaccines are the most likely to thrive.

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Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$53.71 (0.56%) $0.30
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$179.62 (-0.98%) $-1.78
AstraZeneca PLC Stock Quote
AstraZeneca PLC
AZN
$66.81 (0.24%) $0.16
Novavax, Inc. Stock Quote
Novavax, Inc.
NVAX
$46.13 (-0.88%) $0.41
Moderna, Inc. Stock Quote
Moderna, Inc.
MRNA
$130.85 (-0.92%) $-1.21
BioNTech SE Stock Quote
BioNTech SE
BNTX
$154.67 (0.11%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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