Booster jabs are easy money for Pfizer and Moderna - Reuters

A healthcare worker administers a shot of the Moderna COVID-19 vaccine to a woman at a pop-up vaccination site operated by SOMOS Community Care in New York City. REUTERS/Mike Segar/File Photo

NEW YORK, Aug 13 (Reuters Breakingviews) - Moderna (MRNA.O) and Pfizer (PFE.N) just found an additional pot of gold. The U.S. Food and Drug Administration on Thursday authorized a third dose of their coronavirus vaccines for immunocompromised people. That’s about 3% of Americans, but broader use is probably coming soon. Both companies will benefit, but Moderna’s roughly $160 billion market capitalization depends on it more.

The science behind additional shots is somewhat murky as immunity isn’t an on-off switch. Vaccines lower the risk of infection, transmission and serious illness. The side effects from Pfizer and Moderna’s jabs appear to be minimal. As efficacy tends to wane over time – though how much isn't yet clear for Covid-19 immunizations – there's a case for an extra shot for the most vulnerable, even if, as is the case for now, it's not yet tailored to new virus variants.

If the goal is to end the pandemic, though, booster shots aren’t the best use of vaccines. Pfizer cited a study that showed the efficacy of two doses of its vaccine declined over time to 84% from 96%. A few percentage points are nice, but the gains from giving jabs to the unvaccinated are far greater, which is why the World Health Organization has asked governments to hold off on boosters until more people receive initial doses. Yet for political reasons, governments in rich countries probably will encourage boosters anyway.

Pfizer and Moderna together expect roughly $50 billion of vaccine sales this year. Assume generously that half of the people who receive two doses this year get an additional shot next year. If the price is the same, that’s roughly an extra 25% of this year's revenue, or $12.5 billion, to split between them.

Pfizer's $264 billion market value accounts for a lot more than just its vaccines. Though it has big plans, Moderna remains largely focused on Covid jabs for now. It’s valued at about 7 times estimated revenue over the next 12 months, according to data from Refinitiv. That’s almost twice the multiple accorded to Pfizer and other peers. Even on that generous valuation metric, Moderna's worth depends on finding over $20 billion of sales annually. Moderna has created its own luck so far, but it will need to sell more than just coronavirus boosters to keep levitating.

Follow @rob_cyran on Twitter

CONTEXT NEWS

- The U.S. Food and Drug Administration on Aug. 12 authorized booster shots of existing Covid-19 vaccines made by Pfizer and Moderna for patients with compromised immune systems. The FDA amended the emergency use authorizations for the vaccines to allow third doses for “solid organ transplant recipients or those who are diagnosed with conditions that are considered to have an equivalent level of immunocompromise.”

- Rochelle Walensky, director of the Centers for Disease Control and Prevention, has said this group represents less than 3% of American adults.

- Other countries are studying or have authorized booster shots more widely. On Aug. 12, an advisory panel to Israel’s government recommended the country lower the age at which Israelis would be eligible to receive a booster shot to 50. In July, Israel began giving booster shots to people over 60.

- The World Health Organization has asked governments to hold off on booster shots until more people worldwide receive their initial doses.

Editing by Richard Beales and Marjorie Backman

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

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