The orders for Pfizer (PFE -1.28%) and BioNTech's (BNTX 2.24%) COVID-19 vaccine keep flowing in. So far, the two partners have secured supply agreements with the European Union totaling 600 million doses, including one signed just last week for 100 million doses. Pfizer and BioNTech are supplying 300 million doses to the U.S. In addition to these two big supply deals, Pfizer and BioNTech have agreements in place with several other countries including Canada, Japan, and the U.K.
And now it looks like Pfizer and BioNTech are at the threshold of signing the biggest vaccine supply deal ever. Here's what makes this especially great news for investors in these two stocks.
Big euros on the way
European Commission (EC) President Ursula von der Leyen stated last week that the EC is only a few days away from finalizing an agreement to buy up to 1.8 billion doses of Pfizer and BioNTech's COVID-19 vaccine. The doses would be delivered through 2023. This deal will give countries in the European Union enough vaccine to fully vaccinate all 450 million EU citizens for two years.
No financial details of the deal have been announced. However, Bulgarian Prime Minister Boyko Borissov stated earlier this month that the new contract price would be 19.5 euros per dose. If the full 1.8 billion doses of the vaccine are purchased, Pfizer and BioNTech stand to make more than 35 billion euros over the next couple of years, or around $42 billion at current exchange rates.
There's a pretty good chance, though, that the EU won't need all of those doses. Pfizer has indicated that booster shots would likely involve only one dose. Still, even if only half of the order is filled, Pfizer and BioNTech will split around $21 billion.
A positive sign
Obviously, it's great news for shareholders that Pfizer and BioNTech are likely to secure a significant revenue stream for the next two years. However, the prospects of a huge EU deal could also be a positive sign that other countries, especially the U.S., could sign major supply deals with the companies as well.
One of the biggest concerns for all of the drugmakers with COVID-19 vaccines has been how much of their revenue from the vaccines will be recurring. It's now beginning to appear that those concerns can be laid to rest. If the EU plans to buy enough vaccines to fully immunize its population at least through 2023, the governments of other developed nations could be thinking along the same lines.
Any worries that Pfizer and BioNTech's COVID-19 vaccine might not be as competitive over the long term can also now be put aside. Messenger RNA (mRNA) vaccines made by Pfizer/BioNTech and Moderna have proven to be the safest and most effective COVID-19 vaccines authorized so far. It also helped that Pfizer and BioNTech were able to demonstrate that their vaccine could be stored at standard freezer temperatures for up to two weeks.
Here's the bottom line for both Pfizer and BioNTech: The huge EU deal, which should be finalized soon, gives investors reasons to be more confident about both companies' prospects. That confidence hasn't been a problem for BioNTech, with the biotech stock more than doubling so far this year. However, investors haven't been as enthusiastic about Pfizer; the big drugmaker's shares are up only 5% year to date.
If the U.S. follows in the EU's footsteps and inks a big supply agreement with Pfizer for 2022 and beyond, any reservations about the company's COVID-19 vaccine prospects should evaporate. The chances of that happening just might be better now than they've ever been.