In the earlier days of the pandemic, the race was on. Companies rushed to bring a coronavirus vaccine through development and to market, and investors rushed to invest in these potential vaccine makers. As a result, back in 2020, biotech hopefuls including Moderna (MRNA 1.69%), Novavax, and BioNTech (BNTX 0.58%) -- and even some smaller players -- saw their shares soar.
In recent times, though, investors have shied away from vaccine makers and potential vaccine makers. Demand for shots has declined, and that's prompted them to worry about these companies' revenues -- or potential revenues -- in a post-pandemic setting.
Still, the coronavirus hasn't disappeared. At the same time, the vaccine market is undergoing a dramatic change. In this new context, do vaccine stocks still make good investments? Let's find out.
The early vaccine market
Governments worldwide signed agreements with vaccine makers for the delivery of a certain number of doses, then governments would ensure the distribution of vaccines to pharmacies and vaccination centers. This offered companies a great deal of visibility on their annual vaccine revenue -- and they saved on costs when it came to logistics. After all, companies had just a few customers -- governments -- instead of the many customers they would have to serve in a commercial market.
The two vaccine leaders -- Moderna and Pfizer (PFE 0.55%)/BioNTech, brought in annual revenue of as much as $18.4 billion and $37.8 billion, respectively, last year in that environment.
But things are changing. As mentioned, demand for vaccines has declined in this later stage of the pandemic. No one knows for sure exactly what percentage of the population will go for annual shots as the pandemic switches to an endemic situation.
Some elements offer us clues, though, about coronavirus vaccine revenue potential and the market ahead. What does today's and the future vaccine market look like?
Companies no longer are primarily selling their vaccines to governments. Instead, they are selling into a private, or commercial, market. This means they don't sign advance purchase agreements for a specific number of doses over a period of years as they did with countries.
The commercial market
In a commercial market, vaccine companies must approach pharmacies, health systems, employers, wholesalers, and many other entities that eventually would offer a particular vaccine to those who need it. This involves more complexity and cost when it comes to marketing and distribution. That said, companies are charging a lot more for their vaccines than they were when dealing only with governments -- about $130 a dose, compared to about $30.
This higher cost shouldn't impact demand. Though there have been some reimbursement glitches as the market transitions to a commercial one, the government has required insurers to cover the shots without cost sharing. This means the expense of the product shouldn't be a reason for people to say no to vaccination.
Speaking of demand, Moderna and Pfizer both have predicted the market will follow that of the flu vaccine market, implying about 50% of Americans may go for an annual jab. If this happens, we could be looking at blockbuster revenue for vaccine makers.
Even if sales aren't as high as they were in the past, at least they'll be recurrent. That's a definite plus.
Moderna has said the addressable coronavirus vaccine market could total about $15 billion, and that means more than one company can bring in significant annual revenue, thanks to vaccine sales.
Is it time to invest?
Let's get back to our question: Do vaccine stocks make a good investment right now? For the long-term investor, the answer is yes.
These stocks probably won't soar overnight as they did earlier in the health crisis, but they also offer you less risk. The biggest players -- Moderna, Pfizer/BioNTech, and Novavax -- have won the regulatory nod and are generating revenue. It's clear that demand for vaccines will continue, even if not at levels we saw in the past.
Declines in these stocks mean you can scoop them up for a bargain right now.
As mentioned earlier, these companies each could bring in recurrent revenue from their vaccines, and that gives earnings a certain level of stability. Ideally, you won't invest in a company just for its vaccine, but also for the potential of its pipeline. For example, Moderna aims to launch 15 products within the next five years, expanding well beyond the coronavirus market.
Even if vaccine stocks probably won't double your money overnight, these players still represent an exciting investment opportunity -- and one that could bring you great rewards over time.
