Pfizer (PFE 1.39%) and Moderna (MRNA 1.24%) both have generated billions of dollars of revenue from their coronavirus vaccines. The two companies dominate the market. But in recent times, investors have worried about vaccine revenue once the pandemic ends.
While Pfizer has a vast portfolio of products across therapeutic areas, Moderna still depends on its coronavirus vaccine and booster for all of its revenue. Moderna's share performance reflects these concerns: The stock has dropped about 50% so far this year.
But Pfizer recently said something that could signal more billion-dollar revenue -- not only for itself, but for rival Moderna. Let's take a closer look.
The vaccine revenue equation
It's been difficult for investors to truly pinpoint future vaccine revenue. There are two main factors that make up the equation: vaccine prices and demand from the public.
Since the earlier days of the pandemic, governments have ordered vaccine doses at prices they've negotiated with the manufacturers. But in the not-too-distant future, coronavirus vaccines will enter the private market. This means vaccine makers will sell vaccines directly to distributors to be administered in pharmacies and other healthcare settings.
When this happens, vaccine makers no longer have to offer the same lower prices given to governments during an emergency. And this is where Pfizer's news comes in. The big pharma player last week said it aims to sell its vaccine within the range of $110 to $130 per dose in the U.S. private market next year. This is higher than some Wall Street estimates of about $50 per dose. And it's at least three times higher than the price the U.S. government pays per dose today.
So how does this impact Moderna? Moderna already has said that it plans to charge between $64 and $100 per dose for its vaccine in the U.S. private market. But the latest news from Pfizer could spur Moderna to further increase its vaccine price to fall in line with its larger rival.
NASDAQ: MRNA
Key Data Points
A bigger market than expected?
Moderna predicted the U.S. coronavirus vaccine market could be worth as much as $13 billion. That's if half of the U.S. adult population gets vaccinated and shots cost $100. That market size increases to more than $16.7 billion if doses are priced at $130.
This offers Moderna -- and Pfizer -- an opportunity to generate billion of dollars more than planned. And we haven't even added in potential revenue from international markets.
Of course, there are some "ifs" here. It's reasonable to expect about half of the U.S. population to go for annual coronavirus shots. That's about the same percentage of Americans who go for flu shots every year. The Affordable Care Act ensures vaccines are covered by insurance -- so the cost likely won't be a problem for individuals hoping to get vaccinated.
Still, we won't truly know whether uptake will be strong until we enter a post-pandemic world -- and see whether people continue to prioritize coronavirus prevention. Also, Pfizer and Moderna have shared their plans for pricing, but nothing is set in stone just yet, so this is another unknown.
What does this mean for investors?
If Moderna doesn't raise its vaccine price to fall in line with Pfizer, it still may generate significant revenue from its vaccine well into the future -- even if demand for its vaccine falls a bit short of expectations. But if Moderna lifts the price and uptake is strong, the picture could be even brighter.
All of this means there's reason to be optimistic about Moderna's vaccine revenue -- whether it prices its vaccine at the highest level or not.
But here's what's even more important. Moderna may not be a one-product company for long. The biotech player has three potential blockbusters in phase 3 trials right now -- investigational vaccines for cytomegalovirus, respiratory syncytial virus, and influenza.
It's essential to look at its prospects over the long term. Between this long-term view and the shift to a private vaccine market, Moderna looks like a very promising stock to buy right now.
