Is it profitable to make mRNA vaccines against infectious diseases? – Health Economist

Vaccines against COVID-19 have had a huge beneficial effect on the health of patients. One study found that between December 2020 and June 2021, COVID-19 vaccines saved 240,000 lives.Vilches and others 2022). The figure below shows that as Delta and Omicron variants proliferated in the fall of 2021, COVID-19 vaccines prevented a significant number of deaths. according to Vox.
Research conducted Ahuja and others (2021) found that increasing the total supply of COVID-19 vaccines at the start of the COVID-19 pandemic from 2 to 3 billion doses would have generated $1.75. trillion in social value.

Despite these positive effects, a number of political observers have accused pharmaceutical companies of benefit. Some analysts have predicted that life sciences companies will earn $100 billion in COVID-19 sales and $40 billion in after-tax profits. However, is creating mRNA vaccines against new diseases the right way to make huge profits?

According to a recent NBER working paper prepared by Barberio and others (2022) the answer is a firm “no”. In fact, in most cases, the development of mRNA vaccines for a set of new diseases will be unprofitable. The authors find that:

We analyze the financial performance of a hypothetical portfolio of 120 preclinical mRNA-based vaccine candidates targeting 11 emerging infectious diseases. We calibrate the simulation parameters with the help of experts in mRNA technology and an extensive review of the literature. We found that the portfolio has an average annual return on investment of -6.0% per year and a net present value of $9.5 billion, despite the scientific benefits of mRNA technology and the financial benefits of diversification. Clinical trial costs account for 94% of the total investment, while manufacturing costs account for only 6%. Sensitivity analyzes indicate that the most important determinant of financial results is price per dose, while increased success rates due to mRNA technology, portfolio size adjustments, and the possibility of human trials do not significantly improve financial performance. These results highlight that if the goal is to create a sustainable business model and a robust global vaccine ecosystem, continued collaboration between government agencies and the private sector is likely to be required.

Because the costs of clinical trials are high and the incidence/prevalence of most emerging infectious diseases is highly uncertain (i.e. most do not result in a pandemic), the return on investment for these vaccines is low. It looks like the case when speculation is not really very profitable.