Luckily for Us, Creating a Coronavirus Vaccine Is Profitable

A look at the seven U.S. vaccine developers in human trials and their financial motivations behind developing a vaccine.

We are all currently witnessing an unprecedented global race for a coronavirus vaccine. There are over 135 vaccines that have not yet been tested on humans, and 28 vaccines in human trials. Of those currently in human trials, seven are being developed either partially or completely by American companies (two of these vaccines, one by Arcturus Therapeutics and one by Kentucky BioProcessing, have been approved for human trials but those trials have not yet started). The sheer amount of vaccines currently in development is encouraging and surprising, because vaccines usually aren’t that profitable for pharmaceutical companies; they don’t command high prices, normally, and make up only 2% to 3% of the worldwide pharmaceutical industry. 

In 2018, Goldman Sachs issued a report that asked if curing patients was a sustainable business model. And that’s not just me paraphrasing, the exact words they used were “Is curing patients a sustainable business model?” Under scrutiny from the analysts was Gilead Sciences’ hepatitis C treatment, which cured too many people, with a cure rate over 90%. Curing diseases is great for everyone except the pharmaceutical industry. If a vaccine provides lifetime immunity, everyone who receives the vaccine is only a customer once. Other types of diseases, such as cancer, are much more profitable because patients keep coming back for treatment and can potentially rack up hundreds of thousands of dollars in medical bills. 

A coronavirus vaccine would presumably be priced low enough for everyone to afford (or paid for by the government), and likely wouldn’t generate a huge profit for the company that made it. Why, then, are so many companies joining the race to find a vaccine? Do they just want to make the world a better place or have they found another way to make money? Let’s take a look at the seven U.S. companies developing coronavirus vaccines that are currently undergoing human trials.

Inovio (Phase I)

Headquartered in Pennsylvania, Inovio is developing what would be the first DNA vaccine for any disease to ever hit the market. Inovio’s computer algorithm came up with the vaccine in just three hours, according to a company executive. Some are skeptical of this alleged timeline, but investors don’t seem to care. Stock in Inovio Pharmaceuticals was $3.39 per share at the beginning of the year, and sits at $20.33 as of August 6th. That’s a gain of 500% since the beginning of the year; over the same time period, the S&P 500 is up 3%.

Inovio announced that 34 of 36 volunteers in the Phase I trial had a measurable immune response, and that there were no serious adverse effects. Shortly before they announced progress on their coronavirus vaccine, Inovio awarded large batches of stock options to executives and board members. Phase II/III trials are expected to begin later this summer. The company, with 281 employees and $4.1 million in annual revenue, announced it had received $71 million from the U.S. Department of Defense to scale up manufacturing of its proprietary device for injecting their vaccine into the skin. 

Kentucky BioProcessing (Phase I)

KBP is working on what may be the most unique vaccine. The company is a subsidiary of British American Tobacco, the cigarette company, and is working on a tobacco-based vaccine. Believe it or not, a Canadian company is also working on a tobacco-based vaccine partially funded by Philip Morris. KBP injected tobacco plants with a genetically modified coronavirus to see if it could produce antibodies for a possible vaccine. I’m guessing the vaccine will be taken by traditional injection instead of smoking cigarettes.

British American Tobacco, the parent company, doesn’t primarily make money through vaccines. Their success is tied to cigarettes, and vaccine progress has not had a major impact on their stock price so far. 

Arcturus Therapeutics (Phase I/II)

Arcturus, based in California, has been developing an mRNA vaccine with Duke-NUS Medical School in Singapore. The vaccine led to a strong response in animal experiments, and was recently approved for Phase I/II trials in Singapore. Arcturus will receive up to $10 million from Singapore for assisting with the vaccine, but the real prize has been their skyrocketing stock price. Their stock opened the year at $10.87, and closed on August 6th at $56.08. That’s a cool 416% gain since the beginning of the year, which dwarfs the S&P 500’s year-to-date return of 3%.

Johnson & Johnson (Phase I/II)

It’s no surprise that Johnson & Johnson, the largest healthcare company in the world, is working on a coronavirus vaccine. Johnson & Johnson’s vaccine is made from another virus, adenovirus serotype 26, or Ad26, a virus that causes mild colds but is effective at invading human cells. They currently have an Ad26 HIV vaccine undergoing trials, and initial trials seem promising (although many vaccines seem promising initially and fail in later trials).

Johnson & Johnson has received $456 million from the U.S. government through Operation Warp Speed and has invested $500 million of its own money into the vaccine. Since Johnson & Johnson is such a huge company, their stock price hasn’t been much affected by vaccine progress.  The company has pledged to produce their vaccine at no profit to themselves.

Novavax (Phase I/II)

Novavax, based in Maryland, has ongoing trials for an influenza vaccine as well as their coronavirus vaccine. Their vaccine works by containing the spike protein of the SARS-CoV-2 molecule. Novavax received $384 million from the Coalition for Epidemic Preparedness Innovations (CEPI) back in May, and recently announced it could receive another $1.6 billion from the U.S. government’s Operation Warp Speed if clinical trials show their vaccine to be effective.

At the beginning of the year, Novavax stock was just $3.99 per share. As of August 6th, the stock was priced at $167.50 per share, a whopping gain of 4,098%. For comparison, the S&P 500 is up 3% over the same period. Novavax has been criticized for awarding top executives, including their CEO, potentially over $100 million in stock options that could pay out even if their vaccine fails. Instead of tying the options to vaccine approval, they will be awarded if the vaccine enters a mid-stage clinical trial, regardless of the success of the vaccine. 

This is especially troubling because it encourages the company’s top executives to mislead the public about the progress of their vaccine if it is not doing well in trials. As long as the stock price stays inflated throughout mid-stage clinical trials, company executives will be able to redeem their millions in stock options before what could be an inevitable crash (if their vaccine fails).

It’s not just top executives who benefit from an inflated stock price, either: Novavax issued a batch of new stock awards to all employees when shares were below $24 (they are now over $160).

Pfizer (Phase II/III)

New York-based Pfizer has partnered with BioNTech, a German company, and Fosun Pharma, a Chinese drug maker, to develop an mRNA coronavirus vaccine. Phase I/II preliminary results showed that volunteers produced antibodies, and some had moderate side effects like sore arms or sleep disturbances. 

Recently, Pfizer was awarded nearly $2 billion from the U.S. government for 100 million doses of the vaccine to be delivered before the end of the year. That works out to about $20 per dose, a price tag which will give the company an estimated profit margin between 60% to 80%. The U.S. will have rights to obtain 500 million more doses. The vaccine would be provided to Americans for free, and Pfizer won’t receive the almost $2 billion until the vaccine is approved and the 100 million doses are delivered. 

Pfizer is a huge corporation that does a lot more than develop vaccines, so their stock price has not been affected by vaccine news and is flat for the year. 

Moderna (Phase III)

Moderna was the first American company to start human trials and the first to start Phase III trials. The vaccine uses messenger RNA, or mRNA, to trigger an immune response. Moderna has selectively released positive information about the progress of their vaccine, but actual results are mixed. A press release in May by Moderna claimed there were “no serious adverse events” for a particular dosage group, but the full results tell a different story. Every single participant was showing signs of headaches, chills, or fatigue, and for 80% it would have interfered with their normal activities. One 29-year-old participant spiked a fever of over 103° and fainted in his home, although the higher dose he took will not be used in future trials.

Vaccines are overwhelmingly safe, but coronavirus vaccines currently in development can and will have side effects. Manufacturers are painting rosy pictures of their vaccine, but it is always better to be honest with the public. If vaccines are expected to have no side effects whatsoever, and Americans get their first dose and experience a fever or headaches, they may not come back for their second dose. It is critical for people to believe a vaccine is safe and effective, and misrepresenting potential side effects of your vaccine is a great way to lose the trust of the American public.

Moderna is receiving $955 million from the U.S. government to develop their vaccine, yet their company president, Stephen Hoge, said, “We will not sell it at cost.” One dose of the Moderna vaccine (two doses may be required) will cost as much as $37, more than three times what other companies have said they are going to charge. Moderna has never brought a product to market, but that doesn’t stop executives from turning a profit. Company insiders have sold about $248 million in shares since their January vaccine announcement, and most of it was sold after the company was selected to receive government funding. 

At the beginning of the year, Moderna’s stock was priced at $19.57 per share; the stock closed at $73.76 on August 6th. That’s a gain of 277% on the year. The S&P 500 is up 3% over the same period of time. 

Profiteering off the pandemic

Out of the seven American-based companies developing a vaccine currently in human trials, four of them are smaller companies. All four of them, Arcturus Therapeutics, Inovio, Moderna, and Novavax, have seen their stock price skyrocket on hopes of their production of an approved vaccine. Other smaller companies not currently in human trials, like Vaxart, have also seen their stock soar on vaccine hopes. In the case of Vaxart, company insiders received stock options worth millions before a critical announcement, and saw the value of their stock options increase six times. Insiders from at least 11 companies have sold shares worth well over $1 billion since March alone, and we’re only getting started.

High-level company executives are typically offered company stock as part of their benefits package. The idea is that owning a stake in the company will align the executive’s goals with those of the company. As we’ve seen with smaller companies developing vaccines, a flaw (at least in the eyes of the public) with offering millions in stock options is that the interests of the company and executives may be completely different than the interests of the general population. The profit is in developing a vaccine, not bringing a vaccine to market. Companies have received billions from the government and from the increased valuation of their stock, but we are still months away, at best, from a widely available vaccine. 

The American public only cares about receiving a safe and effective vaccine (unless you are a shareholder in a company developing a vaccine). Ideally, each and every vaccine in development will turn out to be safe and effective, but it’s too early to know. Results from trials read more like slickly-worded PR statements designed to further inflate the stock price of the company issuing them rather than statements with useful scientific information.

Trust is vital

It is of utmost importance that vaccine manufacturers maintain complete transparency about their products. We’re already seeing firsthand the damage that lying to the public can do; initially, Americans were told there was no need to wear a mask if you were healthy. When officials reversed course, people weren’t sure what to believe. There is still a large portion of the population that refuses to wear a mask.

A few coronavirus vaccine developers have already been misleading the public about potential side effects. While any vaccine is extremely unlikely to cause serious side effects, mild to moderate reactions can still keep Americans from getting the vaccines we need to reach herd immunity. Many Americans will refuse to get the vaccine no matter how safe and effective it is, and if developers are dishonest about their vaccines it will only compound the problem.

Strangely enough, the most trustworthy companies working on coronavirus vaccines appear to be the largest ones. The success of corporations like Johnson & Johnson, Pfizer, and British American Tobacco isn’t contingent upon the efficacy of their coronavirus vaccine. Because they have less to lose and not as much to gain, the incentive to mislead the public is not as great as it is with the smaller vaccine developers. 

We need a vaccine to end this pandemic, and we may get one sooner rather than later, but don’t forget the companies that saw the pandemic as an opportunity to make billions of dollars from the desire for a vaccine. Much of the profits have already been made, and are not contingent upon the production of a successful coronavirus vaccine, which is not at all comforting.

Public healthcare is the answer

These problems are a byproduct of our for-profit healthcare system. When billions of dollars are on the line, the first priority will always be money, not people. It is, of course, highly unethical to use a global pandemic that has killed hundreds of thousands of people as an opportunity to make more money, but giant corporations (and apparently smaller ones as well) have no morals.

In healthcare especially, we need a system motivated to provide the best care rather than one designed to make the most money. The U.S. spends more than any other country on its citizens’ healthcare, yet when it comes to life expectancy we are #38 in the world. If privatized healthcare was truly superior to government-run healthcare, we would be living much longer. Instead, countries with public healthcare provide better care to their citizens at a lower cost. Of the many changes that could result from the pandemic, the U.S. moving to a public healthcare system has the potential to be the most positive and impactful change of all.

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