This article originally appeared in FiercePharma and was written by Arlene Weintraub

When longtime Evercore ISI pharma analyst Josh Schimmer realized that investors were struggling to place valuations on the leading COVID-19 vaccine developers, he pulled out the proverbial envelope, scribbled out some basic assumptions and issued predictions on Tuesday about just how profitable their endeavors might be.

Schimmer’s numbers raised more than a few eyebrows, he reported today.
The analyst predicted in a note that the total market for COVID-19 vaccines would be worth $100 billion in sales and $40 billion in post-tax profits. He assumed frontrunner Moderna would supply about 40% of the market, Novavax would take 20% and the other vaccine developers would split the rest. “One could look at the field under this base scenario and conclude it is reasonably valued in total,” he wrote.

But the Evercore ISI predictions included some assumptions that investors questioned, particularly about Moderna. Schimmer estimated that at a price of $35 a dose, a 50% profit margin and a 20% tax rate, the company’s $30 billion market cap implies it will sell more than 2 billion doses. Plus, the company could very well sell more than 2 billion doses at higher prices, and it has other vaccines in the pipeline that could pay off down the road, he said.

Some investors questioned whether Moderna’s vaccine “could have lower operating margins since it’s being jointly developed with the NIH—raising a question [of] whether the government agency might be entitled to a meaningful [percentage] of the profits,” Evercore ISI said in today’s follow-up note.

Others brought up yesterday’s news that Moderna scored a $1.5 billion deal with the federal government to supply 100 million doses of its mRNA vaccine, if it succeeds, with the option for another 400 million doses. That suggests the price per dose for government purchases would be less than $25.

As for the 50% pre-tax profit margin on COVID-19 vaccines, that prediction generated mixed responses, Evercore ISI reported. Schimmer based the estimate on reports from companies like Bavarian Nordic, which has pulled in that margin on stockpiled vaccines. But some investors “pointed out operating margins might be higher than 50%, since platforms are readily scaled and doses are extremely small,” Schimmer wrote.

Evercore’s predictions included other conditions that may not play out as expected. For example, Schimmer estimated that each person would need five doses of a COVID vaccine to be fully protected. He also used a price of $20 per dose to calculate the total value of the market, even though the prices disclosed so far have varied widely, from a few dollars (AstraZeneca) to Moderna’s controversial $25 to $35.

Then there’s the uncertainty around which vaccine makers will take the biggest share of the market. Moderna and Novavax may seem to be the frontrunners now, but much larger players are following close behind, including Pfizer, Johnson & Johnson and AstraZeneca. “If some vaccines work better than others, the downstream (and potentially more lucrative) billions of doses may go to the best-in-class profiles more so than the first movers,” Schimmer warned.

Pfizer also has a supply deal with the U.S. government, which is worth $1.95 billion for 100 million doses. The company is testing a two-dose regimen of its mRNA vaccine for COVID-19, which one analyst estimated could bring in $15 billion in profits for the drugmaker.

Although Pfizer’s executives have said they’re not seeking a return on investment for their COVID efforts, CEO Albert Bourla did recently cite a “huge commercial opportunity.” He has also said publicly that he doesn’t agree with critics who suggest pharma companies should forgo all profits on COVID vaccines.

Evercore ISI’s Schimmer told investors there could be an upside to the valuations for COVID vaccine developers, particularly if they’re able to apply their platforms to other vaccines in the future. But many of the firm’s clients seemed unwilling to look that far into the future, he reported.

“I think this misses the point that we should be walking away from this pandemic with a new appreciation for the value of vaccines well beyond COVID-19,” Schimmer wrote.