Covid gave the vaccines subsector a significant boost, but its potential goes well beyond preventing pandemics
Dr. Mike Tubbs examines the situation and the implications for investors.
Vaccines protect people from serious illnesses and stop the spread of disease. The final week of April has been declared "world immunisation week" by the World Health Organization (WHO), which uses the occasion to highlight the importance of vaccinations. Vaccines have decreased infant mortality by 40% and saved 154 million lives globally since 1974. Over the past five years, the value of the vaccine market has grown by 15% annually. Vaccines function by inducing the production of antibodies that combat bacteria and viruses by the body's immune system. Diseases like smallpox, polio, and tetanus that once killed or maimed millions of people have become rare or extinct since vaccinations were developed.
English physician Edward Jenner invented the first effective vaccine. He found that smallpox could not infect milkmaids who had cowpox. James Phipps, an eight-year-old boy, was subsequently vaccinated using material from a milkmaid's cowpox sore. James was ill for a few days, but he soon got better. Two months later, Jenner injected James with material from a human smallpox sore; however, James remained healthy and became the first person to receive a smallpox vaccination.
Beginning at eight weeks of age, British children receive a comprehensive series of NHS vaccinations that protect them against whooping cough, polio, hepatitis B, tetanus, and diphtheria. These vaccinations continue into early childhood and adolescence, when they receive treatments against meningitis, HPV, and sepsis. The yearly "flu shot," pneumococcal, shingles, and respiratory syncytial virus (RSV) vaccinations are available to adults over 65. As Covid reminded us, pandemics also require vaccinations.
The growth of vaccines against cancer.
A lab technician prepares the enzymes needed to create a customized cancer vaccine.
There is a promising new class of therapeutic vaccines that can treat diseases like cancer in addition to the conventional vaccines discussed above. Unlike other vaccines, cancer vaccines train the immune system to identify a pathogen before an infection occurs. Rather, a cancer vaccine stimulates a robust response to pre-existing tumors by using proteins made by cancer cell antigens. Put differently, they function by inducing the body's immune system to identify and combat cancerous cells.
This is accomplished through three main mechanisms. Delivering tumor antigens to dendritic immune-system cellsspecialized cells shaped like treesis the first step. These show them to other immune system cells, which react to the cancer. The second is to activate a specific type of immune-system T-cell, which are white blood cells that are essential for preventing illness and can directly target tumor cells. Targeting particular proteins that are present in cancer cells but absent in healthy cells is the third strategy. Using mRNA technology, which prepares the immune system to combat cancer cells, is one of many highly customized strategies. Antigens that are shared by a large number of people can be used to treat some types of cancer in a less individualized manner.
There are currently several cancer vaccine clinical trials underway. For instance, a phase-I trial of an mRNA vaccine made by BioNTech for non-small-cell lung cancer began last year at University College Hospital in London. This is the first of three stages of clinical trials. Additionally, a personalized mRNA cancer vaccine from BioNTech and Roche is being tested in a phase-II trial at Memorial Sloan Kettering Cancer Center for pancreatic cancer, one of the deadliest types of cancer.
Additionally, research is being conducted to find new cancer vaccines. For instance, GSK is investing £50 million in a three-year collaboration with Oxford University to explore pre-cancer biology in order to develop novel approaches to cancer vaccines. Cancer vaccines are currently being developed by a number of pharmaceutical and biotech firms.
Some early cancer vaccines are currently available. For instance, Merck's BCG is used to treat bladder cancer in its early stages. Additionally, bladder cancers that have advanced despite BCG treatment are treated with Ferring Pharmaceuticals' Adstiladrin gene therapy. Dendreon Pharmaceuticals' Provenge vaccine, which is derived from a patient's own dendritic cells, is used to treat metastatic prostate cancer.
The vaccine subsector is growing.
According to Fortune Business Insights, vaccine sales worldwide are expected to increase from £85 billion in 2024 to £179 billion in 2032. The emergence of next-generation vaccine technologies, like the mRNA approach used for Covid vaccines, increased funding for research and development (R&D) in the vaccine subsector, and the rising incidence of infectious diseases are the primary growth drivers. For instance, with a £5 billion initial investment, the US Department of Health hopes to speed up the development of next-generation vaccines through public-private partnerships.
Covid vaccines dominated the global vaccine market in 2021, accounting for 70% of the market by value. However, by 2023 and 2024, this share fell to 28% and 15%, respectively. In 2023, seasonal flu, PCV (which protects against pneumonia, meningitis, and ear infections), and HPV (which addresses sexually transmitted HPV infection, genital warts, and some cancers like cervical cancer) were the top three vaccines by value, aside from Covid.
Global patented vaccine-market shares by company for 2022, excluding sales of the Covid vaccine, are highlighted in a WHO report. The top six vaccine companies are Merck (24%), GSK (21%), Pfizer and Sanofi (15%), CSL of Australia (3%), and SII, the Serum Institute of India (2%). There are forty-five other businesses, the majority of which have market shares well below one percent. The subsector is extremely concentrated: in 2023 (including Covid), only five businesses made up 79% of the global market by value, while seven businessesthe six mentioned above plus Modernaaccounted for 84%. By far the biggest market for vaccines in terms of value is the United States.
Apart from the aforementioned large pharmaceutical companies, Novartis and AstraZeneca have smaller vaccine interests relative to total sales. There are also a number of much smaller vaccine manufacturers. These include Novavax, Sanaria, Inovio Pharmaceuticals, Bavarian Nordic, Moderna, and BioNTech, which developed the first mRNA Covid vaccines but are currently utilizing mRNA technology to create cancer treatments and vaccines.
The top five companies that make vaccines.
Logos for vaccine companies.
The companies that sell the most vaccines are Merck, GSK, Pfizer, and Sanofi; CSLs are far smaller. The best indicator of a company's relative position in the vaccine market and its vaccine sales as a percentage of total sales is its sales from the previous year. Merck sold £13.5 billion worth of vaccines in 2024, or 21% of total sales. Pfizer sold £13.2 billion worth of vaccines (not including Covid ones), or 20.7% of total sales (or 29.1% if Covid vaccines are included).
Sanofis's vaccine sales were £8.3 billion, or 20.2% of its total, while GSK's vaccine sales were £10.3 billion, or 25.9% of its total. Just £1.4 billion worth of vaccines are sold by CSL (20 percent of total sales). In 2023, seasonal flu, shingles, PCV, and HPV were the four vaccines with the highest worldwide sales by value, excluding Covid. Both GSK and Merck produce all four varieties, but GSK's Shingrix has supplanted its shingles vaccine, which was developed in collaboration with Sanofi. Sanofi only produces the flu shot, while Pfizer produces PCV.
Pharmaceutical companies' pipelines are promising.
We can determine which companies are most likely to gain market share in the coming years by looking at the quantity and quality of vaccines being developed in pharmaceutical companies' pipelines. We begin with the top four vaccine manufacturers. The RSV vaccine was first introduced to the market by GSK in 2023. In addition to ten in phase II and two in phase III (varicella and meningitis), it recently submitted a new one to regulators. Merck has two phase II vaccines (for cancer and dengue fever), a cancer vaccine in phase III, and HPV and pneumococcal vaccines undergoing approval review. Pfizer has four phase II and three phase III vaccines (Covid, Streptococcus, and Lyme disease). Sanofi offers five phase II and four phase III vaccines (yellow fever, pneumococcal, rabies, and flu for adults over 50).
Let's move on to a few of the smaller businesses that were previously discussed; some of them have pipelines that are surprisingly robust. Sanaria, a nonprofit organization, is creating a gene-edited malaria vaccine that offers 90% protection, according to clinical trials. Moderna and BioNtech are creating new vaccines with their mRNA platforms. Although Moderna has its own Covid and RSV vaccines available, two of its projects were shelved in November 2025 as part of a pipeline pruning.
Pfizer marketed BioNtech's successful Covid vaccine, and the company is currently utilizing its mRNA technology to create infectious disease vaccines and cancer immunotherapies. With eight cancer vaccines undergoing more than 20 phase-II and phase-III trials, BioNtech's primary focus is cancer. The most advanced of the group, BNT113, is undergoing phase-III trials for head and neck cancer. There are four early phase trials for infectious diseases (malaria, shingles, TB, and mpox).
The pipelines of the other smaller firms are modest. Novavax has four phase-II or -III trials (all Covid and flu), a malaria vaccine with SII, and a Covid vaccine with Sanofi on the market. Treatments for HPV and Covid are undergoing phase-III trials at Inovio. There is only one phase-II trial (equine encephalitis) among Bavarian Nordic's six products.
Where to search for vaccines right now.
Merck & Company. Inc. signage on the New York Stock Exchange (NYSE) floor.
Vaccines only make up 2026% of the sales of the four biggest companies, so investors should carefully consider the companies' other products and the pipelines supporting them. Merck is the riskiest company because, although its primary patent expires in 2028, its successful cancer drug Keytruda accounted for 46% of 2024 sales. Additionally, while Keytruda's sales increased by 18% over 2023, overall sales, excluding Keytruda, decreased by 1% between 2023 and 2024.
The success of Merck's 20 oncology medications and vaccines in phase-III trials, as well as acquisitions, will therefore determine the company's future. Over the coming years, these could produce a number of blockbuster products (those with yearly sales exceeding £1 billion). Investors are at risk because these two paths might not be as effective in spurring growth as Merck anticipates.
Over the past few years, GSK's R&D productivity has significantly increased, and it now benefits from a diverse pipeline that covers four areas: HIV, oncology, infectious diseases, and respiratory, immunological, or inflammatory issues. Fifteen medications and seven vaccines are in phase III, while five medications and two vaccines are registered. Phase III of bepirovirsen, a possible hepatitis B treatment, is currently underway. From 31.4 billion in 2024 to 40 billion in 2031, GSK now projects its revenue.
Pfizer has a strong distribution network and economies of scale due to its size (2024 revenue reached £63.6 billion), which together give it a long-lasting competitive advantage. Internal medicine, vaccines, inflammation or immunology, and oncology are the company's four current areas of focus. However, compared to Merck's 27.9 percent, it only allocates 17 percent of its revenue to research and development. Despite having £45 billion in revenue, Eli Lilly invests more in research and development than Pfizer, accounting for 24.4% of total revenue. Two-thirds of Pfizer's phase-III trials in oncology are product enhancements, which may be explained by the company's low R&D spending.
With R&D accounting for 18% of sales, Sanofis' revenue in 2024 was 41.1billion (£48.1billion), up 6.5% from 2023. Sanofi specializes in immunology, neurology, oncology, rare diseases, and vaccines; nearly half of its phase II and regulatory submissions highlight immunology. Regeneron Pharmaceuticals, the company behind Dupixent, an immunology medication with sales of £13.1 billion in 2024a 13.3 percent increase over 2023is involved in a number of initiatives. Sanofis's forecast for 2025 calls for a single-digit increase in sales that is mid-to high.
Novartis and AstraZeneca are two more big pharmaceutical companies with vaccine interests. AstraZeneca's revenue in 2024 was £54.1 billion, a 21 percent increase from 2023. By 2030, it hopes to generate £80 billion. It produced seasonal flu shots, the first Covid vaccine, and vaccines in Philadelphia, the Netherlands, Belgium, and Liverpool. Manufacturing is also outsourced to companies in Germany and India (SII). Due to the Labour government's reduction of the investment incentive agreed upon with the previous government, the company has abandoned plans to expand its Liverpool vaccine manufacturing plant by 450 million.
Novartis now supports manufacturing agreements and production partnerships with other businesses rather than concentrating on developing vaccines on its own. For instance, it produced the Covid mRNA vaccine. According to SII, a private company, it is the biggest producer of vaccines in the world in terms of doses. It mainly works as a generic vaccine manufacturer and in alliances with other pharmaceutical companies, like AstraZeneca on the most recent Covid vaccine. On the other hand, it has created a few better vaccines.
Things to buy.
Seven of the businesses listed in the preceding sections are worth looking into as possible investments. Two groups comprise these seven. The first four lower-risk companies are Sanofi (Paris: SAN), Pfizer (NYSE: PFE), GSK (LSE: GSK), and AstraZeneca (LSE: AZN). Merck (NYSE: MRK), BioNtech (Nasdaq: BNTX), and Moderna (Nasdaq: MRNA) comprise the second, riskier group. The latter two are not profitable.
AstraZeneca has a forward dividend yield of 1.8 percent and a forward price/earnings (p/e) ratio of 18. The company plans to increase revenue by 48% between 2024 and 2030, and its shares have increased by 88% in just five years. The share price of GSK has increased by 35% over the past five years, and the company has a forward p/e ratio of 9.5 and a dividend yield of 3.5%. By 2030, it aims to increase revenue by 27%. Pfizer's share price has decreased by 32% over the past five years (primarily due to declining profits from the Covid vaccine), and the company has a forward p/e of 8.4 and a dividend yield of 6.9 percent. Given that 2024 revenue was £63.6 billion, Pfizer's forecast for 2025 is for revenue in the range of £61 billion to £64 billion, which is hardly impressive. Sanofi's forward p/e ratio is 9.8%, its dividend yield is 4.7%, and its stock has only increased by 6% in the previous five years.
As previously mentioned, Merck faces the risk that its successful Keytruda cancer drug, whose patent expires in 2028, will continue to generate enormous profits in the absence of new oncology drugs. The dividend yield is 3.2 percent, and Merck's forward p/e ratio is 11.2. Over the past five years, the stock has increased by 35%. BioNTech is still working on its Covid vaccine and has an intriguing pipeline of potential cancer vaccines. It has no dividend, a forward p/e of seven, and a 16.8% increase in share price over the previous five years.
Investors looking for high-yielding dividend stocks may be tempted by Pfizers 6.9 percent forward yield at its recent price of £24.9, but those seeking growth with a reasonable dividend are more likely to go for AstraZeneca, with a yield of 1.8 percent. By 2030, Astra wants to increase revenue by 48%. Then there is GSK, which has a 3.5 percent yield and a collaboration with Oxford University on a cancer vaccine. Sanofi produces a 4.7% yield.
Compared to Moderna, BioNTech has a better pipeline because it is developing a number of conventional vaccines in addition to potential blockbuster medications and cancer vaccines. The company might market them in collaboration with a few large pharmaceutical firms that have wide distribution networks.
Merck, yielding 3.2 percent, has a large and interesting oncology pipeline and is less risky than BioNtech as it has a diversified set of products in vaccines (where it leads the field by revenue), animal health and drugs for diseases other than cancer. However, the patent for its popular cancer medication, Keytruda, expires in 2028. Depending on your level of risk tolerance, you may choose to invest in two or three of the lower-risk companies and one of the two riskier ones.
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