Should Pfizer Investors Be Worried About Moderna's Lawsuits?

A once-friendly rivalry isn't so friendly anymore. Moderna (MRNA 3.28%) announced last Friday that it filed patent-infringement lawsuits against Pfizer (PFE 0.23%) and BioNTech (BNTX 0.55%) in the U.S. and Germany.

A portion of the billions of dollars made by Pfizer and BioNTech on sales of COVID-19 vaccine Comirnaty are at stake. Should Pfizer investors be worried about Moderna's lawsuits?

Moderna's complaint

Moderna filed several patents between 2010 and 2016 related to its messenger RNA (mRNA) technology. This technology was foundational for the company's development of COVID-19 vaccine Spikevax. Moderna's mRNA vaccine won U.S. Emergency Use Authorization in December 2020 and secured full Food and Drug Administration (FDA) approval in January 2022. 

The crux of Moderna's lawsuits is an allegation that Pfizer and BioNTech's COVID-19 vaccine Comirnaty infringes on those patents. Moderna Chief Legal Officer Shannon Thyme Klinger stated in the company's press release last week: "We believe that Pfizer and BioNTech unlawfully copied Moderna's inventions, and they have continued to use them without permission."

Moderna maintains that Pfizer and BioNTech advanced four COVID-19 vaccine candidates into clinical testing but ultimately picked one with the exact same mRNA chemical modification as Spikevax. It also alleges that Pfizer and BioNTech copied an approach developed by Moderna for encoding the full-length spike protein found on the surface of the novel coronavirus in a lipid nanoparticle formulation.

In October 2020, Moderna pledged that it wouldn't seek to enforce its COVID-19 patents during the pandemic. However, the company updated that pledge in March 2022 with COVID-19 vaccines readily available throughout much of the world. Moderna's revised commitment was to never enforce its patents for COVID-19 vaccines used in low- and middle-income countries. But the company didn't extend that promise to major developed markets.

Potential impact

What's the potential impact on Pfizer? Most importantly, Moderna isn't trying to remove Comirnaty from the market. Nor is it trying to prevent any future sales of the vaccine. Neither is Moderna seeking damages related to Pfizer's sales in any of the 92 countries covered in the GAVI COVAX Advance Market Commitment (known as AMC 92 countries). 

Pfizer and BioNTech could, though, be liable for patent infringement (if proven) related to any sales of Comirnaty outside of the AMC 92 countries from March 8, 2022 and afterward. This date is based on when Moderna updated its pledge related to enforcement of its COVID-19 patents.

In the second quarter of 2022, Pfizer recorded $8.8 billion in sales of Comirnaty. Based on the big drugmaker's guidance, another $10 billion will be made in the second half of this year. We don't know exactly how much of Comirnaty's sales were from March 8 through the end of Q1, but it's likely at least in the ballpark of $3.4 billion. Adding all of this up, Pfizer will probably record more than $22 billion in sales of Comirnaty this year to which Moderna is seeking damages.

Moderna didn't indicate the licensing terms that it thinks are acceptable. Should Moderna win in court, a 20% royalty (which isn't unusual) would require Pfizer and BioNTech to pay around $4.4 billion to Moderna plus any punitive damages assessed along with royalties on future sales of Comirnaty. Of course, Pfizer and BioNTech would share the financial burden.  

No worries?

It's pretty clear that Pfizer investors aren't all that worried about the Moderna lawsuits. The big drugmaker's share price is down only slightly since the litigation was announced. As for BioNTech, the vaccine stock is actually up a little.

Pfizer said in a written statement to CNN that it hasn't fully reviewed Moderna's complaint but was "surprised by the litigation" and would "vigorously defend against the allegations of the lawsuit." Similarly, BioNTech said in a public statement that its "work is original, and will vigorously defend against all allegations of patent infringement." BioNTech noted that these kinds of patent lawsuits are "an unfortunate but rather regular occurrence."

The courts will have to determine which side is right. However, Pfizer is making so much money from Comirnaty that it shouldn't feel too much pain even if Moderna wins.