U.S. pharmaceuticals giant Pfizer, in partnership with German biotech start-up BioNTech are the first public companies to have a Covid-19 vaccine approved by regulators. So far the vaccine has only been given the green light in the UK but Europe, the U.S. and the rest of the world are expected to follow shortly.
Moderna, another U.S. company, relatively young having only been founded in 2010 and going public just two years ago, was next. Its vaccine has also successfully passed stage 3 clinical trials and awaits approval. The UK’s effort, the result of a tie-up between British pharma giant AstraZeneca and Oxford University, is just behind them and could be approved in the UK before the end of the year. If not, early January would be the expectation.
There are as many as 100 Covid-19 vaccines under development by different companies and partnerships. Vaccines are being developed based on every established and breakthrough technology known to science and other public companies at the front of the race include:
- Johnson & Johnson (USA)
- GlaxoSmithKline/Sanofi (UK/France)
- CanSino Biologics (Hong Kong)
- NovaVax (USA)
The Covid-19 vaccination programmes that will roll out around the world in early 2021 and beyond will represent by far the biggest max vaccination program over a concentrated period of time in global history. Hundreds of millions of doses of the vaccines, pending regulatory approval, have already been ordered.
Pfizer expects its Covid-10 vaccine revenues to peak at around $3.5 billion in 2021. That’s a lot of money, even if it can be presumed considerable resources were invested in the lightning speed process of developing it, getting it through clinical trials and to market in record time.
But will it make a big difference to Pfizer’s valuation next year, or that of its development partner, the much smaller BioNTech? Are their stocks worth a look from investors on the lookout for 2021’s big opportunities?
And what about shares of the other companies producing vaccines, like Moderna and AstraZeneca?
Let’s take a look at the impact that might be expected on valuations of the public companies mentioned, who are among the first to bring Covid-19 vaccines to market.
Will Covid-19 vaccine revenues see Pfizer’s share price climb in 2021?
Pfizer’s revenues will certainly get a boost from Covid-19 vaccine sales next year. The company itself forecasts sales to peak in 2021 at $3.5 billion. But, and it’s a relatively big but, Pfizer, and analysts, don’t expect those revenues to translate into a big bump for profits.
It’s also less than clear how competitive the Pfizer/BioNTech will be once there is choice on the market and the first rush of orders for whatever regulator-approved vaccines are available subsides. Rival vaccines, most imminently, the AstraZeneca/Oxford University product, are expected to be significantly cheaper. The latter will cost $3-$4 a dose, compared to $20 for Pfizer’s.
Another big issue with the Pfizer/BioNTech vaccine is the complicated logistics requirements it comes with. Doses have to be stored at -70C, and can’t be moved more than 4 times. By contrast, the AstraZeneca vaccine can be kept in a normal fridge.
Margins are also said to be tight and any profits will be split with BioNTech. In short, stock market analysts don’t expect Covid-19 vaccine sales to move the needle for Pfizer’s share price. However, 2021 is still considered more likely than not to see gains for the pharma’s valuation.
Pfizer’s overall portfolio revenues have been hit this year as a result of patients suffering from non-Covid-19 conditions putting off diagnosis or treatment. That’s led to a drop in overall drugs sales which would be expected to bounce back next year. That drop across Pfizer’s portfolio revenue is why its share price was up only 3% for 2020 in early December, despite being the first company to have a Covid-19 vaccine approved.
Other factors that may well play into 2021 gains for Pfizer include plans for the company’s healthcare and generic drugs businesses to be spun out in a restructuring move that will simplify the main company and allow it greater focus on drugs discovery.
Finally, Pfizer’s P/E ratio contracted from 23x in 2018 to 13x in 2019. While the company’s P/E is still at around 13x trailing earnings, it could see further expansion given the market share gains for some of its drugs, including breast cancer treatment Ibrance, as well as margin expansion after the de-consolidation of its low-margin businesses, driving the earnings growth in 2021 and beyond.
12-month analyst forecasts for the Pfizer share price
Following gains over the past couple of weeks, at $41.73 as of December 11th 2020, the Pfizer share price is actually slightly ahead of the median analysts forecast for the next 12 months.
Source: CNN Money
It still looks more likely than not that the Pfizer share price will see gains in 2021 but steady progress is considered far more likely than a stellar performance.
Is Pfizer’s development partner BioNTech worth a closer look?
BioNTech, the small Nasdaq-listed German biotech that was Pfizer’s development partner for its Covid-19 vaccine has seen share price gains of over 280% in 2020. As a much smaller company, does it have more potential upside? Or is the company’s current valuation overly exposed to the vaccine’s revenues?
BioNTech’s current share price is actually higher than the median analyst forecast for the next 12 months, which is for just $111.17. The high is $126, and as of December 10th 2020, the stock’s priced at $129.5.
Longer term, a situation mirrored by another vaccine producer Moderna, the success of the mRNA technology BioNTech are specialists in, bodes well for the rest of the company’s pipeline. But in terms of potential 2021 gains, at current price levels, the BioNTech stock looks risky.
After 700% gains in 2020, is there more 2021 mileage for Moderna?
Given that it is a much smaller, younger company, and that Covid-19 vaccine revenues and profits are expected to be its main source of income for the next year, might Moderna be a more enticing prospect for investors eyeing vaccine stocks?
Moderna’s vaccine is still to gain regulatory approval anywhere, but that’s a status expected to change in the near future. Its vaccine also has a significant advantage over Pfizer’s – it can be stored at refrigerator temperatures for up to 30 days, easing logistics pressure. Its efficacy is, based on clinical trials to date, similar to that of Pfizer’s vaccine, at around 94% to 90%.
The downside of the Moderna vaccine is its expense. Its expected to cost between $25 and $37 a dose, compared to $20 for Pfizer’s and $3-$4 for Moderna’s. Which raises questions over how competitive it will be when there is a range of vaccines on the market, at different price points.
The company also lacks the scale and experience of a Pfizer or AstraZeneca when it comes to supply lines, manufacturing and distribution, despite a tie-up with Swiss company Lonza. That raises doubts about how quickly, and to what extent, it will be able to scale up its vaccine production and distribution.
Moderna’s share price has also gained almost 700% already this year. Most of that on the back of optimism around its Covid-19 vaccine. Which has to raise the question of whether upside isn’t already priced into the biotech’s current valuation.
Analysts are divided in their opinion on how much upside might be left for Moderna. Those who are optimistic, are pinning their hopes on the fact that the success of the biotech’s Covid-19 vaccine is a positive sign for the rest of its pipeline of therapies. Moderna is developing another 21 vaccines and therapies to treat rare diseases, all of which are based on the same breakthrough mRNA technology used for the Covid-19 vaccine.
If positive results are generated by clinical trials being conducted for other treatments in Moderna’s pipeline next year, there could be a further boost to its valuation. But there is also possible downside if clinical trials results are less positive or delayed.
Source: CNN Money
There’s general optimism around Moderna’s mid to longer-term prospects as a company. But whether real share price progress is likely from current levels next year is less certain.
Is AstraZeneca the dark horse for investors looking for 2021 upside?
London-listed pharmaceuticals giant AstraZenica has what many specialists believe could be the most practical of the Covid-19 vaccines likely to receive regulatory approval earliest. It is likely to be just behind Pfizer and Moderna, but once the vaccine, developed in partnership with Oxford University, is approved it may well be favoured by governments buying huge supplies.
It will cost just $3 to $4 per dose and can be stored in a normal refrigerator. That makes logistics relatively painless and a price point more than 5 times lower than its nearest early competitor – the $20 Pfizer vaccine.
But AstraZenica won’t make any money from its Covid-19 vaccine, even if it proves to be the best seller of all the options on the market. The company committed to developing and selling the vaccine as a not-for-profit enterprise. Which is one big reason why the cost of its vaccine is so low compared to competitors.
Despite that, analysts are generally pretty optimistic around AstraZeneca’s likely share price fortunes in 2021. However, the company’s 2021 performance is expected to benefit from a general uptick in drugs sales across its portfolio, and pipeline progress, not the vaccine.
Like Pfizer, AstraZeneca’s 2020 revenues have been hit by a drop in overall drugs sales as Covid-19 discouraged or hindered patients suffering from other ailments and illnesses from being diagnosed and treated. As life returns to normal as the vaccine is rolled out, normal order should resume, benefiting AstraZeneca’s valuation.
Of 25 analysts polled, 19 expect AstraZeneca’s share price to outperform in 2021. Just 5 rate the company as a hold for existing shareholders, and only 1 was negative. AstraZeneca’s dual listing on the Nasdaq currently sees its stock valued at a little under $54 dollars, with the median 12-month outlook for $66 and the optimistic outlook for $77.
Covid-19 vaccine stocks unlikely to be a 2021 investment goldmine
Overall, the conclusion has to be that investors should be wary of chasing 2021 returns based on Covid-19 vaccine revenues. They’ve either largely already been priced in to stocks, leaving at least as much downside risk as potential upside. Or for larger companies, the margins are unlikely to be attractive enough to move the needle within the context of broad portfolios of more profitable treatments.
Ironically, of all the Covid-19 vaccine stocks, AstraZeneca looks like it has the most upside potential for 2021. But none of it is actually based on the company’s Covid-19 vaccine, which it won’t make any profit on.
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