What’s next for Pfizer, Moderna beyond their projected $51 billion in combined Covid vaccine sales this year

Pfizer and Moderna expect $51 billion in combined vaccine sales in the coming year, even as the omicron wave dramatically subsides in many parts of the world and both companies believe the pandemic is shifting into an endemic phase where the virus will be less disruptive to society.

Pfizer expects $32 billion in Covid vaccine sales for 2022, while Moderna is forecasting at least $19 billion in sales, the companies said in their fourth-quarter earnings statements released last month.

Those are minimum sales, reflecting contracts that have already been signed by nations across the world anticipating their need for the year. But they could be far higher, depending on the trajectory of the virus. Pfizer just raised its 2022 Covid vaccine sales guidance by $1 billion from its previous forecast given to investors in the third quarter while Moderna upped its guidance by $2 billion.

The companies’ 2022 expectations come after booking bumper revenues during the the first full year of the Covid vaccine rollout. Pfizer sold $36.7 billion of its Covid vaccine worldwide in 2021, representing 45% of its total year revenue of $81.2 billion. Moderna’s vaccine is its only commercially available product, and the $17.7 billion in 2021 sales represents effectively all of its $18.5 billion yearly revenue.

The vaccine makers are booking strong profits on their shots. Moderna soared to profitability after the vaccine rollout, reporting $12.2 billion in net income for 2021 after a net loss of $747 million in 2020 while the shots were under development. Pfizer’s 2021 profit margin on the vaccine was in the high 20% range and is expected to slightly rise in 2022, according to Chief Financial Officer Frank D’Amelio. Pfizer splits profits from the vaccine equally with its partner BioNTech.

Pfizer’s vaccine, Comirnaty, and Moderna’s, Spikevax, have both received full approval from the Food and Drug Administration. The vaccines received emergency use approval in December 2020 after rapid development began in the spring of that year.

Pfizer remains far and away the dominant vaccine in both the U.S. and European Union, the two companies’ key markets. Some 58% of all Covid shots administered in the U.S. were Pfizer’s and 37% were Moderna’s, according to data from the Centers for Disease Control and Prevention. In the E.U., 71% of all doses administered were Pfizer’s while 17% were Moderna’s, according to Our World in Data.

Pfizer and Moderna both expect the pandemic to shift into an endemic phase where the virus is less disruptive to society. Michael Yee, an analyst at Jefferies, said he expects Moderna will have a strong year, but future demand is unclear as the unprecedented wave of omicron infection rapidly declines in many parts of the world.

“The market continues to debate the ultimate trajectory of the demand for boosting during 2022 and for 2023 and beyond,” Yee told CNBC. “There is a sense that we are working our way out of a pandemic and more into an endemic where we have seen the peak behind us.”

Jefferies has a hold rating on Moderna’s stock with a price target of $170. Moderna’s stock is down 42% year to date. It was trading around $148 on Thursday.

Moderna’s Chief Medical Officer Paul Burton told analysts during the company’s earnings call last week that the Northern Hemisphere, is moving into a period where new infections, hospitalizations and deaths are more stable. Moderna’s key markets, the United States and Europe, are located in the Northern Hemisphere.

Burton said Covid will likely follow a seasonal pattern like other well-known respiratory viruses such as the flu. Although a majority of the population will not be susceptible to severe disease, the virus will still cause sickness and death among the vulnerable. CEO Stephane Bancel said people older than 50 and those with health conditions will still need to get vaccinated against Covid. Key markets are already preparing for annual boosters, he said.

“Some countries like the U.K. and others wanted to secure supply because they believe very deeply that the endemic market will require annual boosters,” Bancel told analysts during the company’s earnings call.

Bancel also noted that Moderna’s $19 billion sales projection for this year doesn’t include any orders from the U.S., which receives its last shipment in April and hast not signed a contract for the fall. Moderna also has $3 billion in vaccine order options on top of its already signed agreements.

Bancel said he expects a substantial portion of those options to be exercised by governments regardless of whether a new variant emerges, which could bring the company’s 2022 guidance to at least $22 billion, not including any possible U.S. orders.

Children in the U.S. are not yet eligible for Moderna’s vaccine. Moderna’s shot for teenagers ages 12- to 17-years-old is currently under review by the FDA. The company is waiting to file an application with the FDA to authorize its vaccine for 6- to 11-year-olds until after the shots for teenagers get cleared. Moderna expects data on the vaccine for children 5-years-old and younger this month.

As the market debates future vaccine demand, not all analysts believe the world is rapidly moving toward an endemic phase. Investment bank Cowen believes the endemic seasonal phase may not emerge for another two years. If that’s the case, Moderna’s current Covid vaccine will have longer and stronger demand than many expect, according to Cowen. Boosters that target Covid variants will be crucial moving forward, according to an analyst note.

“Omicron makes it painfully obvious that we are not yet in the endemic seasonal phase and variant-specific boosts may be more important now than ever,” Cowen analyst Tyler Van Buren wrote in the note published last week after Moderna’s earnings. Cowen has a market perform rating on Moderna with a price target of $200.

Moderna announced last week that it is developing a booster that targets omicron and other known variants. Burton, the chief medical officer, said Moderna believes this booster will play a vital role moving forward, because people will need protection against omicron as well as the previous dominant delta variant, which continues to circulate throughout the world.

Moderna’s ultimate goal is to develop an annual booster that covers three major respiratory viruses — flu, respiratory syncytial virus and of course Covid. The company’s candidate for a flu vaccine could enter phase three trials this year, and its RSV vaccine has already moved into phase three testing. Yee, the Jefferies analysts, said Moderna needs to demonstrate strong, clear data that shows a visible path to the market for its other vaccines under development.

“It’s obviously hugely important because the Covid part is becoming less critical as we shift to an endemic period and revenues will presumably be declining,” Yee said.

Moderna said its vision is to create a subscription model for a pan-respiratory vaccine with a 10-year supply of annual boosters, Bancel told analysts during the call. Moderna has memoranda of understanding with Canada and Australia, he said. Bancel previously said the company aims to have the vaccine ready by the fall 2023 in some countries in a best-case scenario.

For Pfizer, analysts are shifting focus to the company’s Covid treatment pill, Paxlovid, as a major source of revenue in 2022. CEO Albert Bourla said during Pfizer’s earnings call last month that the company’s antiviral pill, on top of its vaccine, will equip countries to better manage the virus and move into an endemic phase.

Pfizer is projecting sales of $22 billion this year for Paxlovid. The oral antiviral treatment showed 89% effectiveness in preventing hospitalization among people at risk of severe Covid in clinical trials when administered with a widely used HIV drug. It received emergency authorization from the FDA in December.

During the company’s earnings call, Bourla said 2022 sales for Paxlovid may actually come in much higher than the guidance, which only included deals signed or those close to finalization. Angela Hwang, Pfizer’s biopharmaceuticals chief, said Pfizer is in active discussions with over 100 countries around the world on Paxlovid. The oral antiviral treatment has a higher profit margin than the vaccine, according to Pfizer CFO D’Amelio.

“Paxlovid also carries a higher gross margin than Comirnaty, making any boost in Paxlovid sales more favorable to earnings,” Argus analyst David Toung wrote in a note last month. Argus has a buy rating on Pfizer and raised its price target to $65. Pfizer is down by about 18% year to date. The stock was trading around $48 a share on Thursday.

Steve Scala, a Cowen analyst, said during the earnings call that Pfizer’s guidance on Paxlovid was conservative. “It seems that Pfizer has merely scratched the surface on its 2022 potential,” Scala said.

Pfizer is also developing a vaccine that targets omicron. Bourla has said the shot should be ready this month, though he has noted in the past that it’s not clear how or when the omicron vaccine would be used. Bourla has also said in the past that a fourth shot may be needed, but it’s important to wait on data from studies.

Pfizer’s vaccine for children under 5-years-old is also waiting for authorization. The FDA had sought to rapidly approve the first two-doses of the shot this month, but Pfizer delayed those plans after data showed the significantly lower doses for young kids weren’t that effective. The drug regulator is now waiting for data on the third dose, which Pfizer expects in April.

In the U.S., Pfizer’s vaccine is authorized for people ages 5 and older, and fully approved for those 16 and older. Moderna’s vaccine is fully approved for adults ages 18 and older.