There’s a big Covid-19 vaccination debate taking place all around the world. Australia, where I live, is no exception. Most of the discussion is around the science of the pandemic and from the very outset, I must say, that I have no medical background.
I actually find epidemiology a fascinating science and I believe that vaccines are a critical part of overall disease risk management. It’s not about each individual case, it's about risk management for the entire global population.
Most of what I read from the world’s leading epidemiologists suggest that vaccines are working and saving millions of lives every single day. I acknowledge there are concerns among the population, mainly out of legitimate fear around safety and misinformation via social media platforms. I suspect this will change as education and data improves around the pandemic.
I encourage you to watch Nassim Taleb’s video here which explains why epidimeology shouldn’t be viewed in the same way as individual medicine. I also enjoy following Yaneer Bar-Yam who studies complex systems for a living.
Vaccines view from an ethical investing perspective
What I do want to discuss is how the vaccine business is performing during the pandemic, how the sales are flowing are and most importantly, how profits from sales of new Covid 19 vaccines are to be distributed. I decided to look into the numbers this week and found it fascinating to see the difference between Pfrizer, Moderna and AstraZeneca’s policies on their vaccine profits after doing some reading.
AstraZeneca’s vaccine (Vaxzevria) is the result of a non-profit partnership with Oxford University’s Jenner Institute. AstraZeneca pledged not to profit from the vaccine during the pandemic and is selling it for a far lower price than its competitors (around $4 per dose vs. $25 to $37 for Moderna, for example).
Pfizer and Moderna on the other hand haven’t made similar pledges. They’ll bank their profit and their argument is that profits are important to redistribute to shareholders. They say profits encourages further investment into the biotech space and without for-profit-investment, companies like Moderna would never have been founded in the first place.
Revenues from Vaxzevria sales came in at just $894 million for the most recent quarter. Overall, the firm says its earnings per share (EPS) figure was 1 cent lower due to the program, at $0.42 on a reported basis. We can deduce that due to its lower-cost and no profit pledge, AstraZeneca is actually losing money Covid-19 vaccine. Not revenue, but earnings.
By contrast, Pfizer took in $8 billion for its share of coronavirus vaccine sales in the same period, and expects to generate over $33 billion by the end of the year. Moderna will report its earnings this week, so I’ll be keeping a close eye.
Which side is right?
It depends where you stand. I personally think profit should be sidelined during a global health pandemic and the flow of vaccines to those who want them shouldn’t be driven by profits when lives are at risk. But that’s not how the world works and this is the very reason investors should know exactly what each company’s policies are.
I understand that profit is important to attract investment and efficient markets operate best when government intervention is minimal. What I don’t like is the big pharma companies using taxpayer money when it suits them, by funding public universities for example, then completely privatising the investment returns from their breakthroughs to their own shareholders.
According to Bloomberg, Moderna benefitted from an estimated $4.1 billion in U.S. support while now expecting to record about $19 billion in vaccine sales in 2021. Net profits will go to their shareholders, hopefully tax payers get their fair return on corporate income tax receipts.
The ethics and impact of vaccine sales
Ethical and impact investing is about knowing where each company stands on these issues and then deciding for yourself, given your own judgement and morality, if each investment is worthwhile for you. Many ordinary investors have exposure to all the major vaccine providers through their pension (also known as superannuation) funds.
Morningstar’s Sustainalytics platform has a high risk sustainability rating for Moderna compared to AstraZeneca and Pfizer. There’s no doubt that as global investment starts to shift towards a purpose beyond profit, future drugmakers will be watching closely to see which of the two groups is an overall winner.
This week’s note was a bit different, so I’d like to hear from you if you have any comments or feedback. Remember to subscribe so you can get each note delivered to your inbox.