How does Spritz make money?

The providers of vaccines against Covid-19 can only rejoice briefly

The vaccine business will bring billions into the coffers of companies like Moderna or Biontech in the coming year. However, there is a risk of a slump in sales as early as 2022. In addition, the risks involved in managing complex production chains should not be underestimated.

The vaccines against the coronavirus don't cost the world. For example, according to a list by market research firm Bloomberg Intelligence, the US has negotiated prices for the vaccines it has already ordered between $ 4 (in the case of the AstraZeneca product offered on a non-profit basis) and $ 24.80 (Moderna vaccine) per dose. As a Belgian state secretary revealed in a tweet on Twitter at the end of last week, the EU is paying $ 18 for the vaccine from Moderna and € 12 for that of the two providers Pfizer and Biontech. The politician quickly deleted his entry, but the media were quick enough to report on the content.

High number of unreported cases

However, even with vaccines, the bulk does the business. The EU alone has reserved over 2 billion doses for vaccinations against Sars-CoV-2 from seven different providers. In mid-December, Bloomberg Intelligence put the total value of all previously published supply contracts with vaccine manufacturers at "at least $ 20.5 billion". In fact, a significantly higher sum can be assumed, stated the market watchers. Certain states have not made their agreements with the pharmaceutical industry public. In addition, the purchase price is not known for all communicated contracts.

The prospect of billions in revenue has made investors risk daring at a number of companies. At the German company Biontech, for example, the share price has tripled since the beginning of the year. The company, which currently only employs around 1,300 people, has a market value of a good $ 25 billion. Behind this soaring is the expectation that the Mainz-based company will generate sales of over € 5 billion in the coming year - compared to just under € 500 million that analysts calculate on average for the current year.

Together with its partner Pfizer, the company has so far received the most approvals worldwide. The company's vaccine can be administered in Great Britain, the USA, Switzerland and, since Monday, also in the EU. The US company Moderna has come second in the race for the first vaccine against Covid-19. It received the go-ahead from the FDA last week. Approval in the EU and Switzerland is expected in early January. Moderna's share price has also skyrocketed this year. At around $ 55 billion, the company is worth 7 times what it was at the beginning of the year. Moderna also currently only has around 1,300 employees.

Just a sideline for Pfizer

According to the latest estimates by analysts, the company should be able to generate sales of more than $ 9 billion by 2021. Similar to Biontech, this biotechnology company has so far hardly had any significant income and only owes the now expected business success to its vaccine against the coronavirus.

Pfizer also earns money with the Biontech product, although the vaccine business will only be a sideline for the American pharmaceutical giant. The stock market value of the group, the turnover of which was around $ 50 billion last year, has hardly changed since the beginning of the year. It's a good $ 200 billion.

Lonza takes the money

However, even in Moderna's coffers, only part of the money that states will transfer to the company for deliveries of its vaccine will remain. Like Biontech and numerous other biotech companies with a vaccine candidate, the company is not able to handle most of the production on its own. It has secured the services of the Basel-based Lonza Group and other contract manufacturers in the manufacture of the active ingredient as well as for the production of the finished formulations and the filling into the individual vials.

How much Lonza alone will be charging is not known. However, the company had already announced at an investor conference in October that it was expecting a margin in this business that would not come close to the usual level in supplying customers from the pharmaceutical and biotechnology industries. Lonza put the turnover from the Moderna order at just CHF 110 million in 2021.

Working with a number of external partners poses significant risks for vaccine providers. If only one company fails in the complex value chains, the entire production could come to a standstill, according to industry observers. In connection with Moderna, critical voices have pointed out that one of the contract manufacturers that the company is now relying on, namely Catalent from the USA, had repeatedly been reprimanded by the FDA in the past. For example, workers did not properly disinfect their gloves. Catalent asserts, however, that the problems that emerged during inspections in 2019 have now been resolved.

How long do alliances last?

Last year, before the coronavirus pandemic broke out, only four corporations, GlaxoSmithKline, Pfizer, Merck & Co. and Sanofi, shared around 80% of the global vaccine business. According to estimates by market research firm Evaluate Pharma, total vaccine sales reached $ 32.5 billion.

In this comparatively manageable world, it was hardly common for vaccine manufacturers to outsource significant parts of their value chains. Particularly high quality requirements are placed on vaccines, which is why many suppliers prefer to control production themselves as completely as possible.

Many market observers doubt that the alliances that have now been hastily concluded with a large number of third-party companies in the industry will last. In any case, most industry experts do not expect that the now enticing billion-dollar business with vaccines against Covid-19 will last. The majority of assumptions are still based on the assumption that vaccinations do not need to be refreshed regularly. In the case of Moderna, financial analysts predict, on average, a 40% decline in sales as early as 2022. A similarly severe slump is expected for Biontech's business (–44%).

Competition from China and India

These forecasts are based on the simple assumption that by the year after next, thanks to mass vaccinations, the lucrative markets in the industrialized countries will be largely grazed. In addition, it is to be expected that in view of the growing competition from vaccines, also from emerging countries such as China or India, the price per dose will fall to a few dollars.