The U.S. government will pay $1.95 billion to Pfizer Inc. and Biontech SE for the first 100 million doses of their jointly developed mRNA-based COVID-19 vaccine once Pfizer manufactures it and receives the FDA’s approval or emergency use authorization.

The two companies agreed, as part of Operation Warp Speed, to begin delivering 300 million doses of a COVID-19 vaccine in 2021.

The agreement includes the government’s option to buy as many as 500 million additional doses. The companies said they could potentially manufacture more than 1.3 billion doses by the end of 2021.

Americans will not be charged to receive the vaccine, according to Pfizer and Biontech. Some companies have committed to providing their vaccines, once approved, at cost. Others said they would make a vaccine available at “not-for-profit pricing.” A few have said their vaccines will be “reasonably priced.” Astrazeneca plc and Johnson & Johnson said their vaccines would sell for the production cost.

In early July, Gary Disbrow, the Biomedical Advanced Research and Development Authority’s acting director, told a Senate committee that vaccines developed with taxpayer funds will come with an appropriate reduction in price. However, that same day, CDC Director Robert Redfield emphasized the cold-chain distribution system for those products requires the same kind of at-risk investment that is used for vaccine development, the absence of which could significantly impede efforts to deploy a vaccine.

Breaking down the dollars and amount of vaccine in the initial Pfizer/Biontech order, the cost per dose is $19.50. SVB Leerink’s Geoffrey Porges wrote Wednesday that the $15 to $20 range is within its expectations and would provide an “important” benchmark for COVID-19 vaccine pricing as well as signaling profitability for other developers. The cost of goods sold, Porges continued, will be in the low single-digit dollar range, signifying about a 60% to 80% profit margin.

H.C. Wainwright & Co. analyst Robert Burns wrote Wednesday that the $19.50 per dose figure is roughly in line with the CDC’s estimate of $16 to $25 for an influenza shot.

“In our view, government purchase contracts for COVID-19 vaccines worldwide are unlikely overall to involve pricing that is significantly above this range,” Burns added.

Mizuho Securities analyst Vamil Divan wrote Wednesday that, based on the firm’s recent conversations with investors, there is a wide range of expectations for what Pfizer may charge “but believe overall it was closer to the $15 range per dose.”

BNT-162 is a product of Biontech’s mRNA technology, while Pfizer brings its vaccine development and manufacturing prowess to the table. The development program is evaluating at least four possible vaccines, each with its own combination of mRNA format and antigen target. Two of the four, BNT-162b1 and BNT-162b2, received the FDA’s fast track designation, based on preliminary data from ongoing phase I/II trials.

Phase I/II preliminary data of BNT-162b1, which encodes an optimized SARS-CoV-2 receptor binding domain (RBD) antigen, turned up dose-dependent immunogenicity as measured by RBD-binding IgG concentrations and SARS-CoV-2 neutralizing antibody titers. Further data will enable selection of a lead candidate and dose level for an anticipated phase IIb/III safety and efficacy study. Pfizer and Biontech said that study could begin before July ends.

Biontech, of Mainz, Germany, holds the worldwide market authorization and all trademarks for a product emerging from the program.

Biontech stock (NASDAQ:BNTX) closed up 13.72% July 22 at $104.17 per share.

Pfizer, of New York, and Biontech agreed on July 21 with the U.K. to supply 30 million doses of the BNT-162 mRNA-based vaccine candidate against SARS-CoV-2, subject to clinical success and regulatory approval. Financial details were not disclosed, but terms were based on delivery timing of delivery dosage volumes.

Other companies receiving federal assistance via Operation Warp Speed are Novavax Inc., Regeneron Pharmaceuticals Inc., Astrazeneca, Johnson & Johnson, Moderna Inc. and Sanofi SA.

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