Covid-19 vaccines: shape-shifting virus puts agile manufacturers at an advantage

Like a tedious series of horror movie sequels, the mutations of the Sars-Cov-2 virus are losing their power to shock. But the latest strains, which are adept at evading immunity, have spread fast.

Governments are trying to catch up. In late June, US government advisers recommended redesigning the Covid vaccine to target the Omicron variant. The UK government is also considering using the new generation of booster jabs when it offers a shot to all over-50s in the autumn — a wider campaign than originally planned.

The push should boost the flagging vaccine market. In April, vaccine tracker Airfinity cut its 2022 global sales forecast for Covid-19 jabs by 20 per cent to $64.1bn, saying demand had dropped. In the US, France, Germany and Italy fewer than one in 10 people are likely to take up a third booster on current trends. An updated vaccine, timed to coincide with flu jabs, would boost uptake.

The mRNA technology used by BioNTech/Pfizer and Moderna lends itself to the swift redesign of vaccines. That is not the case with the vaccine made from a modified adenovirus by AstraZeneca/Oxford university.

Nonetheless, AstraZeneca’s jab comes second only to BioNTech/Pfizer’s shot in terms of orders. The latter is over a third higher at 5.6bn doses, says vaccine tracker Airfinity. In revenue terms, however, the gap is far wider. AstraZeneca, which until recently supplied the jab on a non-profit basis, collected just $3.9bn in revenues in 2021, compared with $36.8bn for BioNTech/Pfizer.

Analysts forecast Pfizer jab sales will fall to $34bn this year, before nearly halving to $18bn in 2023. The modest valuation of the shares reflects these fading prospects. Pfizer trades on eight times forward earnings, less than half that of AstraZeneca.

But a $3.2bn deal struck with the US government in late June suggests Pfizer’s vaccine revenue may prove more resilient than expected. The price of $30.48 per dose is over a quarter more than the price reportedly paid in 2021. That implies considerable pricing power. Vaccine makers’ ability to pivot quickly could prove a significant advantage, and good news for shareholders.