AstraZeneca has started signing commercial contracts to supply its Covid-19 vaccine next year as the pandemic moves to an “endemic phase” – in a major shift away from the drugmaker’s not-for-profit pricing.
Britain’s biggest pharma firm expects the vaccine to move to “modest profitability” as new orders are received. However, the chief executive, Pascal Soriot, insisted that it was offering affordable and tiered pricing, depending on countries’ ability to pay. He said the vaccine, developed with Oxford University, would not become “a huge profit earner”.
AstraZeneca has sold more than $2.2bn (£1.64bn) of its Covid-19 vaccine, called Vaxzevria, in the first nine months of this year, half of which it booked in the three months to September.
AZ’s $1.1bn vaccine revenues in the third quarter are far below the sales made by US rivals Pfizer ($13bn) and Moderna ($4.8bn). Earlier this month, Pfizer forecast vaccine revenues of $36bn this year and $29bn next year after it started shipping booster jabs and shots for children.
AZ had pledged to sell its vaccine at cost for the duration of the current Covid-19 pandemic, and has charged about $5 a shot. On Friday, Soriot effectively declared the pandemic over. “We have to accept that … the virus is becoming endemic. And we’re going to have to learn to live with it, which means in great likelihood regular boosters,” he said. “We are moving to an endemic phase and next year is the target for these commercial contracts.”
AZ has come in for a lot of political criticism outside the UK even though it has been one of the few vaccine makers selling its shot at cost. Its jab has not been approved in the US after questions were raised over the way it had reported trial data. AZ intends to file for US approval by the end of the year. Confidence was eroded further when a rare link with blood clots was reported. The firm has also been embroiled in a public row with the EU over delays to vaccine supplies, and the EU has not placed further orders.
Soriot said he had “no regrets” about not making a profit from the vaccine when others have, and insisted it had a future. He said it was the world’s second-biggest Covid jab by volume, after the shot produced by China’s Sinovac. “We are all very proud of the impact we’ve had,” he said. “We saved a million lives, and millions of hospitalisations. Mostly we’ve been used in emerging markets.”
By the end of September, AZ had supplied more than 145m doses to low- and middle-income countries through the UN-backed Covax initiative – half of all the Covax supply – which is set to rise to 250m by the end of the year. It will continue to supply its vaccine to the poorest countries at cost price.
It expects to report results from two separate trials of the jab in children and teenagers aged six to 17 before the end of the year.
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: “AstraZeneca may be moving to a world where it generates a profit from its Covid vaccine but it’s not going to be a big number any time soon. Existing contracts are likely to make up the majority of orders for some time.
“Profits also depend on long-term demand for the vaccine in 2022 and beyond. It would seem remarkable 18 months ago but the Covid vaccine market is crowded now and Astra’s unique selling point has long been simplicity and lower cost. A significant increase in prices might simply drive governments into the arms of other suppliers. We think it’s unlikely that Covid-19 vaccines will ever become a major source of profit for Astra.”
AstraZeneca’s share price fell by almost 5% on Friday, making it the top faller on the FTSE 100.
Earlier this week the Anglo-Swedish drugmaker announced it would create a separate vaccines and immune therapies business as it planned for the future of its coronavirus shot. The company said it would be dedicated to the Covid-19 vaccine and tweaked versions to deal with new variants of Sars-CoV-2.
In the final three months of the year, the contribution from the Covid vaccine is expected to offset costs relating to its long-acting antibody treatment AZD7442 for Covid, and earnings guidance for investors remains unchanged.
Soriot said the company was on track to achieving its $40bn sales target (at current exchange rates), set out in 2014 when it fended off a hostile takeover bid from Pfizer, in 2022 – a year earlier than expected.