As the first company to introduce a COVID-19 vaccine, pharmaceutical behemoth Pfizer (PFE 0.74%) experienced enormous windfalls by delivering primary and booster shots on a global scale. The company has distributed 3.4 billion doses of Comirnaty as of the first quarter.
Now, Pfizer is developing a vaccine for another infectious disease with a wide-open market. Let's take a closer look.
Deal with Valneva
Pfizer will invest about $95 million in specialty vaccine maker Valneva, based in France. The two companies have been working together since April 2020 to develop a Lyme disease vaccine candidate, VLA15. Under the terms of the deal, Pfizer will obtain an 8.1% stake in Valneva, will cover 60% of remaining development costs, and will pay Valneva tiered royalties on sales ranging from 14% to 22% along with several milestone payments.
This deal was finalized shortly after announcing successful Phase 2 studies in both adults and children over five that showed the vaccine was safe and triggered a strong immune response. Pfizer plans to follow up with a Phase 3 trial starting in the third quarter of this year to test a three-dose primary series.
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Key Data Points
Checkered history of Lyme vaccines
If launched, VLA15 would become the only vaccine currently available to people to prevent Lyme disease. However, it will not be the first Lyme vaccine to hit the market. Dogs have been vaccinated for Lyme disease since the early 2000s, and negative side effects are rare.
A human vaccine, LYMErix, was introduced by GSK in 1998, but was pulled from the market after four years. The vaccine was highly effective and initially well-received with 1.4 million shots administered. However, demand fell off amid highly publicized fears that it would trigger an autoimmune reaction leading to arthritis, although subsequent studies failed to find any connection between the vaccine and arthritis.
Pfizer hopes people will be more receptive this time around due to the rising prevalence of Lyme disease in North America and Europe. The CDC estimates that the number of people treated for Lyme disease in the U.S. has tripled in the past 20 years, from just 150,000 in 1998 to about 500,000 in 2018.
These numbers are likely to keep growing. A warming climate, coupled with tick hosts developing higher tolerance to cold weather, are allowing ticks to expand into new regions. Infectious ticks now live in half of the United States and are spreading north into Canada. Lyme treatment is projected to cost $3 billion by 2031.
Bulking up the late-stage pipeline
The market for Lyme disease may be nowhere near the size of COVID-19, but there is currently no competition in clinical trials. Researchers are investigating an mRNA vaccine that directly recognizes tick saliva, rather than a specific pathogen such as Lyme bacteria within the saliva, that might confer broader protection against tick-borne diseases. But this laboratory-based work is still far from the clinic, whereas Pfizer could launch its vaccine as early as 2025.
Currently, Pfizer is extremely attractively valued with a price-to-earnings ratio of 12, well below most major healthcare companies. However, this valuation relies on strong sales from COVID-19 Comirnaty vaccine and Paxlovid treatment, which accounted for 57% of total revenue in the first quarter but is likely to decline in future.
These COVID-19 therapies have generated a pile of cash, so Pfizer is in a position to aggressively acquire new technology to replace sales as COVID-19 demand falls. At only $95 million, this deal with Valneva looks modest compared to recent acquisitions of Biohaven for $11.6 billion, Arena for $6.7 billion, and even ReViral for $525 million.
The Valneva deal may not have an immediate impact on Pfizer's top line, but it does help bolster the late-stage pipeline in a growing market with a large unmet need. Look for Pfizer to continue making deals to shore up long-term revenue prospects.
