AstraZeneca to sell Covid-19 vaccine for profit - after saving one million lives

·3-min read

Drug-maker AstraZeneca has signed its first deals to sell the Covid-19 vaccine developed with Oxford University for profit, having supplied more than 1.5 billion doses worldwide at cost price.

The FTSE 100 giant committed to selling the shots “at cost” for the duration of the pandemic and expects the shift to generate “modest profitability.”

It said consultations with medical experts suggest coronavirus will move into a epidemic phase in coming months with future outbreaks starting to become contained to specific countries.

Astra has supplied 145 million doses to low-income countries through the World Health Organisation’s Covax programme preventing an estimated five million Covid cases and saving more than one million lives.

This will continue, with new contracts to wealthier countries sold under a tiered pricing structure. It expects profits to be “much lower” than those racked up by rivals Pfizer and Moderna.

AstraZeneca chief executive Pascal Soriot (AstraZeneca/PA) (PA Media)
AstraZeneca chief executive Pascal Soriot (AstraZeneca/PA) (PA Media)

The transition to commercialising the jab in rich nations was announced today as the £140 billion Anglo-Swedish group issued a flurry of updates from a frenetic third quarter.

Total revenue so far this year has grown by a third to $25.4 billion, with an acceleration in sales of 48% in the last three months to $9.9 billion.

That is a landmark figure for the firm and puts CEO Pascal Soriot’s goal of achieving $40 billion annual sales 2023 within reach.

Revenues were up across its main areas of research with oncology up 19% to $9.4 billion, cardiovascular and renal sales rising 14% to $6 billion and immunology up 16% to $4.5 billion.

It’s been a huge contribution

It also reported positive results for eight drugs in late-stage trials in its pipeline, including a treatment for life-threatening blood disorder Wilson’s disease developed by recent $39 billion acquisition Alexion.

The one-off costs of integrating the Boston-based rare diseases specialist into Astra’s core operations dampened the mood among investors, however.

Analysts highlighted a drop in year-to-date operating margins from 19.1% to 5.3%, while its preferred measure of profitability, adjusted earnings per share, fell short at $1.08 against average analyst estimates of $1.24.

It maintained its earnings guidance for the full year, expecting core earnings per share of between $5.05 and $5.40.

Shares in the company, which have outpaced the sector and are up 23% this year, initially fell 5.2% before paring back losses to trade down 438p at 9006p.

Je ne regrette rien

Sales of Pfizer’s shot are expected to bring in $36 billion this year.

By contrast, Astra’s Covid revenues were $1 billion in the quarter and its rollout has not been without headaches.

A healthcare professional is vaccinated against COVID-19  in Uganda (Getty Images)
A healthcare professional is vaccinated against COVID-19 in Uganda (Getty Images)

Asked if he regretted initially agreeing to supply the vaccine at cost price Soriot said: “I don’t regret it at all. We are very proud of the impact we’ve had.

“This is the second largest vaccine in the world in terms of volume, has saved millions of hospitalisations and a million lives. It’s been a huge contribution.

“But we always said we would transition to commercial orders. It will never be high priced, it’s not something we see as a huge profit earner.”

Sebastian Skeet, at Third Bridge, said: “AstraZeneca finds itself with an enviable number of late stage pipeline candidates to fuel growth in the coming years. The crown jewel, its oncology franchise, goes from strength to strength.

"Whilst AstraZeneca have historically sold their vaccine at cost, it appears the vaccine will transition to modest profitability serving as an additional earning tailwind in the coming quarters."

Nicholas Hyett, at Hargreaves Lansdown, noted the “substantial” fall in profit margins, saying: “It’s far too early to make judgements about the Alexion deal, but it does mean Astra has its work cut out. Major integrations are never easy.

“A lot is riding on Astra’s, admittedly promising, pipeline.”

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