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How This News May Represent a Crucial Test for Moderna and Pfizer

By Adria Cimino – Nov 24, 2021 at 6:30AM

Key Points

  • The FDA has authorized boosters for everyone ages 18 and older -- after earlier authorizing them for a smaller group.
  • Moderna and Pfizer have signed vaccine orders through at least 2023.
  • But some investors still worry about the level of vaccine sales once the health crisis eases.

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It may determine the future of vaccine sales.

Health regulators initially weren't jumping to authorize coronavirus booster shots. This summer, they considered current vaccines offered necessary protection. Still, earlier this fall, they decided to authorize the shots -- but only for certain individuals rather than for broad use.

Coronavirus cases declined over the past two months. In recent weeks, though, the situation has changed. COVID-19 cases are on the rise once again. So the following news may be just in time: Last week, the U.S. Food and Drug Administration (FDA) expanded the authorization of Moderna's (MRNA -2.01%) and Pfizer's (PFE -1.04%) booster shots. This won't lead to an immediate boost in sales for the companies. They've already signed contracts for this year that include these booster doses. But expanded use of boosters may be a key test for Moderna and Pfizer -- one that will determine whether sales will gain down the road.

An investor studies something on his phone in an office setting.

Image source: Getty Images.

One big risk

First, let's talk about the one big risk facing vaccine makers these days. And that's the idea that vaccine or booster sales will fall off a cliff post pandemic. Experts have said the coronavirus will stick around well beyond the crisis. It's expected to become endemic -- a situation where the virus is constantly present at a lower level. In this context, we could imagine significant vaccine sales to continue.

Still, some investors worry. Any hint of weakened sales has been a reason for dramatic declines in vaccine makers. For example, Moderna's shares slid 16% in one trading session after the company lowered this year's sales forecast. As it turned out, the reason had to do with the timing of deliveries -- not an actual drop in orders.

So, where does the latest regulatory decision fit into this picture? The FDA originally authorized Moderna's and Pfizer's booster doses for people ages 65 and older and for high-risk individuals. The new decision authorizes the boosters for everyone ages 18 and older. And White House medical advisor Dr. Anthony Fauci is urging all Americans who have received a primary series at least six months ago to go get a booster.

As I mentioned, even if everyone opts for a booster, Moderna and Pfizer won't see more revenue this year. But the companies may see more revenue down the road. Here's why. First, today's situation could offer a good example of why boosters are needed annually.

Keeping the situation under control

Right now, we are seeing waning immunity among the fully vaccinated after about six months. And as this happens, cases have been rising. Annual boosters may be a way to keep the situation under control. If most people go for a booster in the coming weeks and case numbers drop, Moderna and Pfizer will have a good argument for the use of boosters well beyond the pandemic.

So, concretely, here's how this can lead to more revenue. If individuals see the booster strategy is working, they'll be more likely to opt for a booster on an annual basis. And if buyers of the vaccine -- today, this means countries, but in the future, it may mean healthcare systems or pharmacies -- see booster efficacy in the population and strong uptake, they'll be more likely to place big orders into the future. And this will equal sales growth for Moderna and Pfizer.

Right now, Moderna and Pfizer have signed supply agreements through 2023. And Moderna even has signed options with Canada through 2024. But some investors still are looking beyond next year with a bit of a question mark. What happens over the next several months may help us better define the post-pandemic vaccine market -- and remove that question mark.

I don't expect vaccine or booster sales to drop dramatically in the future. We will need ongoing protection if experts are right. But the success level of the booster rollout could determine just how far vaccine sales may go.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends Moderna Inc. The Motley Fool has a disclosure policy.

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