The success and failure of COVID-19 are the market's summary of Pfizer in the past few years. In 2022, COVID-19 vaccines and COVID-19 oral drugs brought Pfizer up to $57 billion in revenue. Relying on the wealth brought by COVID-19 products, Pfizer's revenue exceeded $100 billion this year, setting a new record for the highest revenue of major pharmaceutical companies. However, as the COVID-19 pandemic dissipated, the global market demand for COVID-19 products fell sharply, and Pfizer was the first to bear the brunt.

Faced with the "COVID-19 cliff", Pfizer had to continue to lower its revenue expectations, and the company's stock price continued to fall. Last year, it fell by more than 40% throughout the year, and its market value evaporated by nearly $130 billion. In this year's third quarter report, Pfizer handed in a report card that far exceeded market expectations. Revenue in the third quarter reached $17.7 billion, a year-on-year increase of 31%, far exceeding the market consensus of $14.9 billion, mainly due to the strong performance of Eliquis, Paxlovid and Vyndaqel series of drugs.

Among them, thanks to the market demand brought by the recent COVID-19 epidemic and the US government's $442 million order, Paxlovid's sales hit a new high of $2.7 billion, an increase of $2.5 billion year-on-year. In this regard, Pfizer emphasized that although there was no sales during this period last year, the revenue of antiviral drugs in the second quarter of this year was only $251 million, reflecting a substantial quarterly increase. In the third quarter, Comirnaty's revenue was $1.4 billion, a year-on-year increase of 9%. It can be seen that the market demand for both Paxlovid and vaccines is quite strong.

The core is that the COVID-19 epidemic has not completely disappeared, and the unexpected surge in COVID-19 cases in the United States in the third quarter of the summer. As shown in the figure below, according to the monitoring of the new coronavirus in wastewater reported by the Centers for Disease Control and Prevention (CDC), July was a peak period of the epidemic in the United States, and the number of people seeking drug treatment after infection was bound to surge.

At the same time, after experiencing a new round of small peaks in the epidemic and facing the upcoming autumn and winter virus season, the demand for COVID-19 vaccination has also increased. This also means that only four weeks after the vaccination was opened in September, the US new crown updated vaccine (2024-2025 version) has reached 11.2%, significantly higher than the same period in 2023.

Data updated by the US CDC to October 25 showed that the percentage of the population vaccinated with the updated 2024-25 new crown vaccine was 4.8% for children, 13.5% for adults over 18 years old, and 30.4% for adults over 65 years old. Last year, only about 22.5% of adults received the new crown vaccine released in the fall.

Of course, for various reasons, the current new crown vaccination rate in the United States is not high. In contrast, the adult influenza vaccination rate in the United States has exceeded 40% during the same period. However, after experiencing the torture of the epidemic in the past two years, people are still quite accepting of the new crown special medicine. After all, this can help some people relieve pain and reduce risks, especially those in high-risk groups.

On the one hand, everyone knows the power of the new coronavirus, and from the perspective of efficacy, Paxlovid is one of the most effective oral drugs in the world, and the FDA has approved its new drug application (NDA) for the treatment of mild to moderate new coronavirus patients over 12 years old at the beginning of the year. In contrast, Merck's Molnupiravir, as the world's first oral new coronavirus drug on the market, is still under emergency use authorization (EUA).

On the other hand, due to the need for epidemic prevention and control, Paxlovid was purchased by the government and distributed to citizens in the United States for free before mid-2023. Although the US government returned a large number of Paxlovids due to the gradual dissipation of the epidemic, causing Pfizer to deduct $3.5 billion in revenue in the fourth quarter of 2023, the "free" promotion of the US government has established a good reputation for Paxlovid. Coupled with Pfizer's commercialization measures, Paxlovid sales have increased significantly during this small peak of the new coronavirus epidemic.

In fact, although the vaccination rate of the new coronavirus vaccine is much lower than that of the flu vaccine, everyone knows that the potential danger of new coronavirus infection is greater than that of flu. As a newly emerged human infectious disease, the new crown has officially reported 776 million cases and more than 7.06 million deaths in more than three years from the beginning of the epidemic to the end of the global public health emergency (PHE) announced by the WHO on May 5, 2023.

These are only the cases and deaths officially reported to the WHO, and the actual number of deaths and cases is far more than these. Although influenza and the new crown are self-limiting infections for most people, for children, the elderly, pregnant women, and people whose immune function is lower than that of normal adults due to various reasons, both infections may cause serious illness or death. Therefore, vaccines and drugs are both rigid needs. Judging from the recommendations of the US ACIP this year, the immunity of the new crown will be consistent with that of influenza in the future, that is, it tends to be seasonally immunized once a year and necessary updates based on the monitoring results of the epidemic strains.

To some extent, this also confirms the status of the new crown as a "large" influenza. This also makes the commercialization logic of new crown drugs closer to influenza. The considerable market size of influenza vaccines lies in two reasons: autonomous pricing and continuous vaccination demand. At present, this is also becoming the commercial logic of the new crown vaccine.

In terms of pricing, the overseas new crown vaccine is priced between US$120 and US$130, which is much higher than the price of influenza vaccine (US$50-90), and vaccine companies have a huge profit margin; and because RNA viruses such as new crown and influenza are escape masters, they are always mutating to avoid the body's immune defense mechanism. Therefore, the new crown vaccine also needs to update the strain and re-formulate it every year like the influenza vaccine, and the vaccine recipients also need to repeat the vaccination every year.

In August, the FDA approved an updated version of the new crown vaccine developed by Pfizer and Moderna, targeting the KP.2 (JN.1 branch) variant, because most of the recent new crown cases are caused by this strain; in addition, the new crown vaccine based on the JN.1 strain produced by Novavax has also been approved for marketing. Due to the persistence of virus mutations, we only use real-time monitoring methods to minimize the differences between vaccine strains and epidemic strains. Judging from the CDC's COVID-19 monitoring results in September, the current dominant strains and the vaccine strains used this year still belong to the JN1 branch, which is quite different from the XBB that was popular last year. Therefore, the vaccine made based on XBB last year is no longer recommended by the CDC this year. This is also the significance of real-time monitoring of the dominant strains.

To fight against influenza viruses, oral drugs and vaccines must work together. Among the oral flu drugs, the most well-known is oseltamivir. From 1999 to 2017, the original oseltamivir drug Tamiflu brought Roche at least $15 billion in revenue. Among them, sales in 2009 alone exceeded $3 billion. But with the entry of generic drugs, Tamiflu has long been off the altar. In China, East Sunshine Pharmaceutical, which obtained patent authorization early, has made Kewei far surpass Tamiflu through dosage form innovation, becoming a "magic drug" for influenza with annual sales of 6 billion yuan. For COVID-19 oral drugs, due to the raging global epidemic, the debut is the peak. When the epidemic returns to a stable or normal state, its market prospects depend on two points: drug patents and efficacy.

In terms of efficacy, Paxlovid has also proven itself and gained market recognition. In terms of patents, Pfizer is also stepping up its layout in order to build a "Paxlovid patent wall". In 2021, Pfizer joined the non-profit organization MPP and waived the patent rights of Paxlovid in 95 low- and middle-income countries around the world, but it also plans to submit patent applications for Paxlovid in 61 countries and 4 regional patent offices. Paxlovid is a combination of a new compound nirmatrelvir (PF-07321332) and an old drug ritonavir. Among them, the main patents of ritonavir (compounds, polymorphs, etc.) have expired, and PF-07321332 is a brand-new molecule.

According to the "Pfizer Paxlovid Patent Map" report, as of 2022, Pfizer has submitted patent applications for Paxlovid in 34 countries. The market speculates that since the patent landscape is not yet fully mature, Pfizer may or has submitted subsequent applications to extend the potential protection period (combination, dosage regimen, further use, polymorphism, etc.). According to its PCT international application date of August 6, 2021, the estimated expiration date of such granted patents is August 5, 2041, which does not include the extension of the patent term. This also means that Pfizer has enough time to make a profit.

In any case, as mentioned above, whether it is destructive or transmissible, the power of the new crown is far greater than that of influenza. Under the same business logic, the market prospects of new crown drugs should be better. This is why, in just three months, Pfizer's sales of new crown drugs + vaccines can reach as high as US$4.125 billion. In other words, as long as the new crown virus does not disappear like the original SARS virus, it will be a high probability event that the commercial value of new crown drugs will surpass influenza.

However, while overseas new crown drugs have proved their commercial value in the self-funded market, domestic companies seem to be "climbing the slope". As far as China is concerned, the new crown is still prevalent. As shown in the figure below, according to the "National Novel Coronavirus Infection Epidemic Situation (September 2024)" released by the Chinese Center for Disease Control and Prevention in October, there have been two waves of new crown peaks this year, in March and July-August. However, judging from the information released by listed companies, no new crown product has emerged against the backdrop of a new wave of epidemics, such as Paxlovid, and most products have long disappeared from the financial reports.

Since July 15, 2024, domestic new crown vaccines will no longer be free of charge and will be adjusted to self-paid vaccination. However, the current prices of new crown vaccines are basically higher than the current flu vaccine prices. According to the data released by the Shandong Provincial Drug and Equipment Centralized Procurement Platform in August, the lowest-priced nasal spray influenza virus vector new crown pneumonia vaccine, produced by Wantai Biological, costs 136 yuan for 0.2 ml/piece; the highest price is the recombinant new coronavirus XBB.1.5 variant vaccine for inhalation, produced by CanSino, with a price of 1,114 yuan for 0.5 ml/piece (3 human doses), and a single price of 371.3 yuan. The single-dose price of several other vaccines is around 300 yuan.

In addition, according to the 2024 COVID-19 vaccine procurement catalog published by Anhui Province, the price of the same product is similar to that of Heilongjiang Province and Shandong Province. Anhui also included Shijiazhuang Pharmaceutical Group's mRNA vaccine (Omicron XBB.1.5) at a price of 598 yuan per bottle. Such a self-paid price will obviously affect the willingness to be vaccinated. In addition, the wrong perception of vaccines, such as being infected with the virus after vaccination, has led to a low vaccination rate for the COVID-19 vaccine.

At the corporate level, perhaps due to low expectations for the self-funded market, some vaccine companies did not continue to invest in the COVID-19 vaccine, but regarded it as a "burden". For example, CanSino's latest third-quarter report showed that total revenue was 567 million yuan, a year-on-year increase of 36.85% (excluding the impact of COVID-19 vaccine returns on the same period last year). The growth mainly came from meningococcal vaccine products, accounting for 91% of sales. Recently, in an interview with the Securities Times, Yu Xuefeng, chairman of CanSino, said that after two years of digestion, the "burden" of the COVID-19 has gradually been unloaded.

During the epidemic, China approved six small-molecule COVID-19 drugs for conditional marketing. In addition to the two high-priced imported drugs Paxlovid and Molnupiravir, there are four domestic drugs: Azvudine, Mindevi, Senoxin and Leruiling. Compared with the "strategic abandonment" of vaccine products, oral drugs have also received attention from some pharmaceutical companies. For example, Mindevi, Junshi Biosciences stated in its semi-annual report that it was officially included in the national medical insurance catalog in January. As of the end of the reporting period, Mindevi had entered more than 2,300 hospitals. Another example is Senoxin. In July, Simcere Pharmaceuticals announced that Senoxin was changed from conditional approval to regular approval. This is also the first and only oral anti-COVID-19 drug in China that has been routinely approved.

After the official approval, the most significant change is that drug purchases will become convenient, that is, patients can buy them at pharmacies by themselves with prescriptions. What kind of competitive changes this will bring will take time to verify. In fact, after the epidemic control was relaxed, most people have experienced 2 to 3 new crown infections. Now they basically don’t take the new crown seriously. They feel that the new crown drugs have lost their role. However, as mentioned above, both vaccines and oral drugs are still very important for people with low immunity. Looking to the future, as long as the virus does not disappear, the demand for new crown drugs will not be a problem. The problem that affects the ceiling naturally becomes how pharmaceutical companies can increase the self-paid vaccination rate and whether the drugs can become a common household medicine like influenza drugs. This requires continuous vaccine research and development, production investment, and drug commercialization and promotion.

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