Covid vaccine profit boom for pharma companies

BarcelonaWhen 2020 was just beginning, the existence of companies like BioNTech or Moderna was unknown to most mortals. Also unknown then was the importance that pharmaceutical giants like Pfizer, Johnson & Johnson or AstraZeneca would gain in our daily lives in the fight against the pandemic that was officially declared on March 11, 2020.

In addition to the temporary collapse of the economy caused by lockdowns around the world, in 2020 at least 1.8 million people died worldwide from complications related to coronavirus. During 2021,which was marked by delta and omicron variants and witnessed up to four more waves, this figure soared to 5.4 million deaths. The impact, however, would have been much worse had it not been for vaccines against the disease. These breakthroughs, which triggered rare stock market euphoria when in November 2020 Moderna and Pfizer announced their effectiveness. This was a watershed moment in the struggle against the virus in the countries with the highest vaccination rates, and their impact on the companies that made them possible was also been massive.

If we focus on the five companies that developed vaccines, we find that two of them, BioNTech and Moderna, the smallest, accumulated losses worth millions during 2019, the last year before the pandemic, in a common phenomenon for early-stage biotechs doing research and development. Among the five, however, they accumulated profits of over €28bn (see graph) with a key role for Pfizer and Johnson & Johnson, two of the largest companies on the planet.

In 2020, as the launch of vaccines was being finalized, this select group of pharmaceutical and biotech companies saw their combined profits fall to €22bn, a year-on-year decline of 23%. That year, however, BioNTech managed to break into the black for the first time, a normal situation considering that before the pandemic it had no products for sale.

Nine months of profits

The real boom in results was experienced this year. BioNTech's profits, for example, multiplies by 475, with the added bonus that no fourth-quarter data is yet available. In just nine months, Moderna has swapped 2019 and 2020 losses (more than €1 billion combined) for earnings of more than €6.4 billion. And Pfizer and Johnson & Johnson (the company that markets Janssen's vaccine) are also making record profits. AstraZeneca, which developed the most questioned vaccine due to its side effects, is the only company that escapes the climate of euphoria, which together and in just three quarters accumulated profits of €44bn this year.

These figures put on the table the old debate in the pharmaceutical sector about the legitimacy of its business. The Spanish Pharma business association, Farmaindustria, has often recalled that studies such as the one carried out by Tufts University in the US which estimate the cost of bringing a drug to market at €2.4bn. It takes between 10 and 12 years to do so and it is also estimated that only one in every 10,000 molecules that are investigated ends up reaching the market.

This has hit a sector that lived through its glory days in the 80s and 90s, but has seen how great medical needs – and consequently the drugs that potentially reach more consumers – are already taken care of. So much so that most patents for common diseases have expired and the door is been open for competition from generic drugs, which are much cheaper and much less profitable.

Even so, the industry has been criticised for its lack of transparency with its pricing policy, especially in its relationship with governments. This has been one of the controversial factors surrounding covid vaccines, with contracts presumably worth millions being kept secret.

Spanish Pharma

The economic boom of covid vaccines has left its mark in Spain. The big winner is Rovi, which has had a successful year that culminated with its entry into the Ibex-35 last week. Rovi reached an agreement to produce the Moderna vaccine and this year has doubled its profits to €99m in the first nine months of the year.

Catalan Reig Jofre has been less fortunate. The pharmaceutical company signed an agreement with Johnson & Johnson to formulate, fill and package the Janssen vaccine at a plant in which it had invested €10.9m. Despite the fact that production was to start in June, it has not yet begun, and the company has not given any reasons. For now, it has seen how the covid profits pass it by.