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How Do Coronavirus Vaccine Makers Make Money?

Feb 4, 2021 7:52 AM 7 min read

The largest vaccination campaign in world history is currently afoot.

As of January 22nd 2021, more than 56.7 million doses of the COVID-19 vaccine have been administered in 52 countries.

There are at least nine vaccine candidates that have been approved for public use. The most widely used among these include Pfizer-BioNTech, Moderna and AstraZeneca-Oxford, but there are others such as Russia’s Sputnik V, China’s CoronaVac and India’s Covaxin.



Governments around the world have already ordered billions of doses at set prices and vaccine makers are racing against time to deliver these booked doses at the earliest. The pricing varies - some companies are selling at cost while others at a premium. Moreover, the pricing depends on the amount ordered and advance commitments with countries.

At this juncture, one may ponder - vaccines are developed by pharmaceutical companies, and companies naturally seek to profit from their products and services. So, how much money are pharma firms making from the coronavirus vaccines?

To put it in simple terms, the economics of COVID-19 vaccines is not particularly typical.

  1. We live in not-so-normal times.

We are in the middle of a global pandemic that is ravaging lives, livelihoods and economies. Usual concepts of profit-craving have taken some sort of a back seat on account of the sheer scale of the humanitarian crisis. Besides, companies are eager to not be seen as a gluttonous corporation minting profits from a pandemic and this is somewhat evident in the thinly available financial disclosures.


  1. State support was crucial for vaccine development.

While many of the vaccines currently in the market are the products of R&D by pharma companies (which undoubtedly deserve commendation for delivering a vaccine in such a historically short period of time), they received a major boost from public coffers.



Earlier in 2020, confronted with economic havoc and rising death tolls, governments across the world loosened their purse strings and showered vaccine manufacturers with funds and all kinds of aid so as to hasten their R&D process. Besides state support, these companies received generous donations from individuals and non-profits, from the Bill & Melinda Gates Foundation to country music star Dolly Parton.

FYI: Bill & Melinda Gates Foundation has already provided $150m to Serum Institute of India (SII) with another $150m on its way taking the total consideration to lofty $300m.

As such, when it comes to the coronavirus vaccines, the relevant companies are not only accountable to their shareholders but also to the government and thus the public. 


  1. Not all vaccine makers are looking to (immediately) price-gouge.

To their credit, many of them have affirmed that they will sell vaccines at cost for as long as possible. Johnson & Johnson and AstraZeneca had pledged to make their vaccines available on a not-for-profit basis, with the latter adding that low- and middle-income countries would receive its vaccine at lower prices.



That said, others have not made such promises. Moderna and Pfizer told US lawmakers last year that they would try to profit from their vaccines to cover R&D costs.


  1. Vaccine-making is usually not a very profitable business.

Vaccines take a lot of money, effort and time to develop. And once they are, recipients only require a dose or two to develop immunity, after which the product becomes irrelevant for them. Companies that initiated work on vaccines against Zika and Sars, for example, had their fingers burnt. On the contrary, sales of medicines for seasonal or non-communicable diseases tend to be recurring and always in demand, making them lucrative and cost-effective ventures.

FYI: Global total sales of all vaccines (for adults and children) is $24bn annually. This represents only 2-3% of the $1trn+worldwide pharmaceutical industry.


However, the sheer scale of demand and the urgency of the crisis may make the COVID-19 vaccine an outlier to this trend. Especially for those firms that have not pledged to sell their doses at cost.

Case in point: US drugmaker Pfizer and Germany's BioNTech stand to bring in nearly $13bn in global sales from their coronavirus vaccine in 2021, according to Morgan Stanley. That’s a killing for both companies - BioNTech is a tiny company with annual revenues of only $148m and Pfizer’s best-selling product in 2019 was a pneumonia vaccine that generated $5.8bn.


  1. The future of the pandemic will determine how much money pharma firms can make.

As an extension of the fourth point, how much vaccine makers can make from the coronavirus vaccine depends on the nature of the pandemic itself. These include factors like how long the pandemic will last, whether the immunity will be life-long or temporary, how long it takes to get the majority of the population vaccinated, and if COVID-19 will be eradicated post-inoculation or if it will be a recurring infection like the flu.

Let’s say by the end of this year vast swathes of the population in most countries have been immunised and some degree of herd immunity would have been achieved and thus the pandemic has been declared over. After this, pharma firms could be able to raise prices to make more profits without being at the receiving end of public or state outrage. And solemnly speaking, chances for money-making would be even greater if the coronavirus isn’t completely eradicated and instead keeps coming back periodically.

But there’s also another way of looking at this. There are more than 50 vaccines in clinical trials right now. In a year or two, there could be 20 vaccines in the market. By then, it would be difficult to charge a premium price amidst high competition.


  1. Patents.

Vaccine makers hold the IP rights to their products. This is of interest not only economically because patents are lucrative to their holders, but also scientifically - the Pfizer and Moderna vaccines have used mRNA technology for the first time. This innovation could be helpful in the fight against other diseases like skin and ovarian cancer.

Vaccine patents last for 20 years, a long period of time for the respective companies to ensure that other drugmakers don’t sell unlicensed versions of their products.

That said, there is immense pressure on these companies to share their information with other manufacturers, especially ones in poorer countries, so as to accelerate the manufacturing process worldwide. Many have said government aid to pharma firms should have come with the precondition that vaccine-making information would be publicly available.


  1. Access to the vaccine will depend on where you live.

This is a rather grim point. Because richer countries like the US, UK and Germany poured money into the R&D process, they have first dibs on the doses being manufactured. For poorer countries such as those in Sub-Saharan Africa, general availability of vaccines may be delayed to 2023 or even 2024. Even with efforts by global vaccine alliances like COVAX.



FYI: This isn’t only a question of rich countries being able to pay more or pharma companies not seeing any profits in poorer nations. The problem is also infrastructural. Some vaccines like Pfizer’s and Moderna’s are required to be stored in very low temperatures, the cold storage facilities for which are simply too expensive or outright absent in many countries.


  1. The cost of the vaccine will depend on where you live.

The cost of vaccines will also depend on the country’s economic status. For example, SII recently inked a deal with South Africa for 1.5 million doses of the AstraZeneca vaccine at $5.25 per dose. This is substantially higher than the $3 a dose that the African Union (AU) is paying for the same company.

The $5.25 pricing was reportedly based on South Africa’s status as an upper-middle-income country under a World Bank classification. Moreover, South Africa would start receiving doses by the end of this month while the AU would have to wait till March.


  1. Let’s talk about India.

India is a low middle-income country, which would have meant difficulty in vaccine attainability. However, it is also the world’s largest vaccine manufacturer. The company that makes the most number of vaccines in the world - SII - is headquartered in Pune. And as of today, two vaccines - the AstraZeneca candidate which is locally called Covidshield and the indigenous Covaxin - have been rolled out for public administration.

Both vaccines are being provided to the Government at about ₹200 ($2.73) per dose. Nonetheless, both SII, which is making Covidshield, and Bharat Biotech, which is making Covaxin, are poised to make profits despite the low pricing. This is mainly due to low R&D expenses and the sheer volume of demand, which includes India as well as millions of doses promised to other countries.

Moreover, the companies will raise prices after the first phase of vaccination to healthcare workers and the elderly gives way to vaccine drives in cities and the private sector, where the market price could rise to as much as ₹1,000 ($13.67) per dose.

All in all, the firms could see 40-50% EBITDA margins in the near-term. Given that SII printed ₹5,238cr ($716m) in revenue and ₹2,252cr ($308m) in PAT implying a 43% PAT margin in 2018-19, a 40-50% EBITDA margin appears to suggest COVID-19 is actually margin dilutive for SII. However, the steep upswing in absolute volume (SII expects to produce 10 crore doses a month by February) and additional upside from price upticks in private markets in the latter phases could also drive modest margin accretion, which should bode well for SII but hard to predict as of now.

Of course, while the pandemic’s effects on pharmaceutical companies’ balance sheets can be a matter of debate, the fiscal toll of COVID-19 vaccination could be crippling. Not only has the pandemic already ravaged the world economy, but many countries such as Japan, Australia and the US are promising free doses to citizens. That would invariably be taxing on their already-strained exchequers.

But that is a different topic for another day.


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