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Pharmaceutical firms’ shares tumble after US plans patent waiver on Covid vaccines

Shares in pharmaceutical companies fell sharply after the US government threw its weight behind global plans for a patent waiver on Covid-19 vaccines to boost their production and distribution around the world.

Shortly after the US declared its support for the intellectual property (IP) waiver, which still has to be approved by the World Trade Organization, shares in Chinese and American vaccine makers tumbled.

The Hong Kong-listed shares of CanSino Biologics, which makes a single-dose Covid-19 vaccine, were down nearly 22% at one stage, while its Shanghai shares lost 17%. Fosun Pharma, which distributes the BioNTech vaccine, fell by up to 18% in Hong Kong.

The overnight falls followed big declines on Wall Street. The vaccine makers Moderna and Novavax fell 6% and 5%, although Pfizer was unchanged. They fell a further 8.9%, 7.4% and 2.3% respectively in early trading on Thursday.

Pfizer and Moderna have together forecast sales of $45bn (£32bn) from their vaccines this year. The Novavax’s shot is yet to be approved, but the Maryland-based firm has pencilled in several billion dollars of revenue in the next 12 months.

Pharmaceutical patents are designed to guarantee a certain level of revenues for drugmakers that usually spend several years and billions of dollars developing new medicines. They last 20 years from the date the patent is filed – rather than when a drug is brought to market – but each new drug is guaranteed five years of patent exclusivity. When patents expire, other companies can make cheaper versions of the medicine.

Hu Yunlong, a Beijing-based fund manager, said: “The patent waiver will definitely have some impact on China’s domestic Covid-19 vaccine makers, as it would increase the global vaccine supply.”

Pfizer said this week it expected to bring in $26bn of revenue from its Covid-19 vaccine this year, with its soaraway product accounting for more than a third of the company’s total annual takings. On Thursday, Moderna raised its estimate to $19.2bn revenues from its Covid jab from $18.4bn previously.

The company made its first-ever quarterly profit since it was founded in 2010 after generating $1.7bn in sales from the vaccine in the first quarter, and is aiming to produce 3bn doses this year. Both companies charge from $30 (£21) for the required two shots.

Moderna’s chief executive, Stéphane Bancel, who has been turned into a multibillionaire as a result of the huge increase in the Moderna share price, said the firm would not enforce its Covid-19 related patents against those making vaccines intended to fight the pandemic.

Pharmaceutical experts said axing patent protection would not solve vaccine supply problems quickly. They argue that manufacturing bottlenecks and raw material shortages were the bigger hurdle to making more Covid-19 vaccines.

However, production capacity has been increased rapidly since the coronavirus was first identified as a threat. According to the Association of the British Pharmaceutical Industry, vaccine manufacturing capacity globally has risen from 3.5bn doses a year before the pandemic to 10bn doses for coronavirus vaccines alone by the end of 2021.

Bancel said the patent waiver would not boost production in the next 18 months. “[It] will not help supply more mRNA vaccines to the world any faster in 2021 and 2022, which is the most critical time of the pandemic,” he said, adding: “There is no idle mRNA manufacturing capacity in the world.”

Some companies are already effectively sharing their intellectual property (IP). AstraZeneca, which sells its vaccine on a cost basis, has shared details of its vaccine through partnerships with 20 companies around the world that make the vaccine, including India’s Serum Institute.

Sheena Berry, an analyst at the investment firm Quilter Cheviot, said: “Details are limited just now but this move is unlikely to help immediately given the technical challenges producing the vaccines, supply constraints and time required to potentially approve the wavier. Manufacturing bottlenecks rather than intellectual property are the bigger hurdle to producing more vaccines and more needs to be done to solve these issues.”

She said vaccine quality might also be compromised. “The requirement of significant scientific knowledge and knowhow can make the vaccines difficult to manufacture and quality of the product is critical in the fight against Covid-19.”

Dr Adam Barker, healthcare analyst at Shore Capital, said there could be longer term ramifications of a change in patent protection. “If pharma companies thought their IP could just be waived, would this discourage innovation going forward? You would presume that this is a temporary proposal given unprecedented circumstances, but no doubt pharma companies would be worried about ‘creep’ into other areas.”