Pfizer (NYSE:PFE) recently lost a battle to preserve its patent coverage on Celebrex, but it's not all bad news for this pharmaceutical giant. The company's Prevnar-13 pneumococcal vaccine is shaping up as a stronger-than-expected product, with comprehensive outcomes data potentially supporting much broader recommendations for use and a larger addressable market. Better still, it's not just Prevnar that could drive higher vaccine sales for Pfizer in the coming years.

A steady source of profits
Vaccines are a big business for Sanofi (NASDAQ:SNY) (approx $5 billion in revenue), GlaxoSmithKline (over $5.5 billion), and Merck (NYSE:MRK) (over $5 billion) in part because they're so attractive.     Generic competition is not really much of a threat here, as these complex biologicals typically require full safety and efficacy testing to demonstrate equivalency, and that is a very expensive proposition. Even if a generic company wished to compete, overlapping IP in antigens, adjuvants, delivery, and manufacturing would make it complex.

There are also issues with manufacturing. Vaccine production rewards scale more than most other drugs; it is quite profitable in large volumes, but the initial costs are very high.

For the companies who get their vaccines to market, though, there are many attractive attributes to the market. Payers, particularly non-U.S. governments, are tough on pricing, but many of these vaccines have customer bases measured in the millions, and many customers will get a vaccine more than once.

Prevnar looks like a hit
Investors had already known that the CAPiTA study of Prevnar 13 in adults aged 65 and over succeeded, but the details last week were better than expected. In a massive 85,000-patient study, Prevnar 13 reduced new cases of commnunity-acquired pneumonia by more than 45% and invasive pneumococcal disease by about 75%.

With this data, Pfizer is looking to get recommendations for broader administration of this already-approved vaccine. The Advisory Committee on Immunization Practices meets in late June of this year, and Pfizer should get the recommendation for Prevnar being given to all adults aged 65 or older. There is also a chance that Pfizer could see this vaccine recommended for adults aged 50 or older, a move that would significantly expand the revenue potential.

Merck's Pneumovax is already out there, but it does not have the outcomes data that Pfizer has established for Prevnar 13. With that, Pfizer may be able to take advantage of a "warehouse" opportunity measuring in the billions of dollars, and an annual revenue opportunity of over $200 million in the U.S., and more should the 50-and-up recommendation come through.

Prevnar isn't the end of the story
Pfizer has more going for its vaccine business than just Prevnar 13. The company's meningococcal B vaccine is in Phase III testing (three trials with over 12,000 patients), with data coming out later this year. Sanofi and Novartis (NYSE:NVS) both have meningococcal vaccines, but they are quadravalent vaccines that exclude MenB. Novartis did secure European approval of its MenB vaccine, Bexsero, but hasn't pursued U.S. approval (likely due to the occurrence of fevers in children getting the vaccine) and the U.K.'s Joint Committee on Vaccination and Immunisation recommended against Bexsero as part of routine immunizations.

Pfizer has taken a different approach by targeting different disease-causing strains and using a different approach to the vaccine design than Novartis took with Bexsero. MenB reportedly causes about 40% of invasive meningococcal disease (IMD) infections in the U.S., with a fatality rate close to 10%. Clearly safety data will matter, but a clean efficacy and safety profile could make Pfizer's vaccine a $2 billion/year product.

Pfizer's staph infection vaccine is a riskier proposition. Data should be available relatively soon (around mid-year), but Merck's attempt at a staph vaccine failed in Phase III. Upping the risk of Pfizer's program, three of the four antigens in the vaccine were in vaccine candidates that failed clinical trials. It is hoped that this four-antigen approach will succeed where others have failed, and Glaxo is reportedly working on a four-component vaccine. Novartis and Sanofi are also reportedly working on staph vaccines, but the specifics are less clear at this time. A successful staph vaccine would likely be worth upwards of $650 million in annual revenue.

The bottom line
Unlike Pfizer's oncology drugs, the company does not have to worry about a half-dozen or more rivals for every indication in its vaccine program. Likewise the risk of generic knock-offs is quite low and the marketing efforts are incremental to ongoing existing primary care operations.

Merck, Glaxo, Sanofi, and Novartis have credible and formidable vaccine operations, so I do not wish to convey the sense that Pfizer has no competitive threats in this space. What I do believe, though, is that Pfizer's three vaccine programs (Prevar 13, the MenB, and the staph vaccine) are strong product candidates that don't often get their due as potentially high-value assets to Pfizer for the long term.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.