Astra Moves to Profit From Covid Shot as Earnings Fall Short
AstraZeneca Plc is moving to profit from the Covid-19 vaccine it developed with the University of Oxford after watching Pfizer Inc. and Moderna Inc. reap huge returns over the past year of the pandemic.
The U.K. drugmaker will start generating modest profits from the shot as new orders are received, AstraZeneca said in a statement Friday. The vaccine will continue to be sold at cost for developing nations.
The company is shifting to a for-profit model even as many countries grapple with rising Covid cases. AstraZeneca Chief Executive Officer Pascal Soriot said Covid is moving into an endemic phase, and the move is in line with the company’s plan early in the crisis, when it pledged not to profit from the vaccine as long as the disease remained a pandemic.
AstraZeneca and Oxford created one of the first coronavirus vaccines, receiving authorization from the U.K. in December. The company has looked on as Pfizer and Moderna, which rolled out successful vaccines around the same time, have made billions of dollars in sales. Astra has said it will only take a profit from wealthier nations, and it will rely on tiered pricing to make sure the shot is affordable.
Pfizer has said its shot which was developed with BioNTech SE -- the best-selling pharmaceutical product of all time in a given year -- is expected to bring in $36 billion in sales in 2021. Astra’s vaccine revenue is $2.2 billion so far this year.
The AstraZeneca vaccine’s profits will be much lower than Pfizer’s, and the shot will “never be high-priced,” Soriot told reporters on a call. The gains will offset costs related to its Covid antibody cocktail.
“It will never be high-priced because we want the vaccine to remain affordable to everybody around the world,” Soriot said. “It has a future, but it’s certainly not something we see as a huge profit earner.”
The company said it will “progressively transition” the vaccine to modest profitability as new orders are received, and Covid vaccine sales in the fourth quarter are expected to be a “blend of the original pandemic agreements and new orders, with the large majority coming from pandemic agreements.”
The vaccine isn’t yet authorized in the U.S., after the company missed the window for an emergency authorization due to the complicated nature of its trial results. Astra is planning to submit the shot for approval to regulators in the first half of next year, according to its quarterly statement.
The company is also in discussions with the U.S. Food and Drug Administration about a pediatric study it will conduct in the U.S., Mene Pangalos, Astra’s head of biopharmaceutical research, told reporters. Another study started by Oxford in 6-to-17-year-olds this year will readout by year-end, which the company hopes will allow it to start immunizing children globally, he said.
The shares dropped as much as 5.9% after earnings in the quarter missed analysts’ estimates.
What Bloomberg Intelligence Says:
A messy quarter, with a 13% EPS miss but reiterated guidance, suggests AstraZeneca has a cost-phasing issue, and consequently needs to beat 4Q consensus even to make the bottom end of its reiterated range. A slight revenue miss ex-Covid-19 vaccine was driven mainly by Tagrisso, but focus will be on on whether the EPS miss is down to a lack of appreciation for the newly-incorporated Alexion cost base or frontloading of launch costs. A reiteration of guidance suggests the latter, though Astra has chosen to incorporate some first-time vaccine profit into guidance, but not amend it.
-- Sam Fazeli, BI pharma analyst
Astra’s Confusing 3Q Leaves It Needing Strong 4Q: React
The development comes after the company said this week it is creating a new unit to house its Covid assets, raising questions over whether it would look to push further into the vaccines space or spin off the business at some point. Astra only had one nasal flu spray before the pandemic. The company also has a monoclonal antibody against Respiratory syncytial virus in advanced development, which will sit in the group.
Astra reiterated its outlook for the year following the acquisition of rare-disease specialist Alexion Pharmaceuticals Inc. The company is in the midst of integrating Alexion into the business and will look for other potential acquisitions and collaborations in the rare disease space, Marc Dunoyer, chief executive officer of Alexion, said in a Bloomberg interview Friday.
“There is so much innovation that is coming out for new modalites in rare diseases,” Dunoyer said from Ireland, where Astra is investing $360 million to build a new manufacturing facility on the Alexion campus there. We will partner with companies and “envisage all sorts of collaborations.”
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