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AstraZeneca to start making a profit from Covid jab as virus becomes ‘endemic’

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AstraZeneca
AstraZeneca

AstraZeneca is to start taking a profit from its Covid jab in a sign that one of the world's biggest drugmakers believes the pandemic is at an end.

The pharmaceutical company said that coronavirus is becoming endemic and a pledge to deliver its vaccine at cost price is no longer needed.

Astra's chief executive Pascal Soriot urged countries to accept that coronavirus will continue to circulate in a similar way to flu as life returns to normal.

He said: "We did actually start this project to help, but we also said that at some stage in the future, we will transition to commercial orders.

"The virus is becoming endemic and we have to learn to live with it."

Experts believe Britain is on the cusp of endemicity - where infection levels are relatively stable rather than surging in massive waves - after cases steadily declined in the absence of restrictions this month. Other European countries such as Austria and Germany are experiencing sharp rises, but are thought likely to reach endemicity within months.

Astra has said that it will “progressively transition the vaccine to modest profitability", and has started to strike deals with buyers for next year on this basis. It will continue to supply the developing world at cost.

The Cambridge-headquartered business was one of only two vaccine makers to forgo a profit on its jabs when Covid hit, as part of efforts to ensure it was affordable to as many countries as possible. Its US rival Pfizer has profit margins on its jab of close to 30pc and expects to make $36bn (£27bn) from sales.

Despite this, Astra became a political football during the pandemic. It has faced heavy criticism from EU politicians over the past year, including erroneous claims by the French President, Emmanuel Macron, that it was "quasi-ineffective" in older people.

Brussels also sought to blame an initially slow rollout of jabs on a failure by Astra to supply it with promised vaccines.

Mr Soriot said AstraZeneca would make lower profits on its vaccine than its rivals and that the vaccine would never be "high priced".

He added: "We will have a tiered pricing structure across the world and we will make sure that our vaccine is affordable to every country."

Ketan Patel, a fund manager at AstraZeneca shareholder Edentere, said investors would be watching closely at how AstraZeneca priced its vaccine.

He said: "There are large parts of the population globally still to be vaccinated. I think they can justify a modest profit, but if it becomes too much of a profit then they'll have to look at pricing."

The deals in which Astra will make a profit include supplies of first and second doses as well as boosters to top up immunity. The company said it could not disclose where it was striking these agreements.

The drugmaker currently supplies more than 180 countries and accounts for about 90pc of all doses given in India. Its jab was also the most widely used vaccine in Brazil over the summer.

Regular boosters are likely to be needed against the virus, Mr Soriot added.

However, analysts said that given Astra's commitment not to profit from developing countries, few of its new deals are likely to be lucrative.

Adam Barker, of Shore Capital, said: "It's mostly used in the developing world. There might be some countries tempted to use it because it will still probably be cheaper than Pfizer or Moderna, but I think most developed countries will use the mRNA vaccines."

Profits made in the fourth quarter from the jab will offset AstraZeneca's spending on its new Covid antibody treatment, the company said.

The company had revenues of $1bn from its vaccine in the third quarter, helping send sales 48pc higher to $9.9bn.

Astra is the second-largest Covid vaccine supplier by volume and still accounts for much of the Covax supply, delivering doses to developing nations. It has sold more than $2.2bn of vaccines since the start of this year.

AstraZeneca announced the policy change days after revealing it would be splitting out its Covid vaccine and antibody treatments into a new division.

Shares fell by almost 6pc after quarterly profits missed expectations before regaining some ground to be 3.5pc lower at £91.09. That left the company worth £141bn, the most valuable on the FTSE 100.