By Michael Brush
(Adds that the U.S. will support a proposal to waive intellectual property protections for coronavirus vaccines.)
Now that science has Covid-19 on the run, it’s game over for the vaccine makers, right?
Not so fast. The winners — Moderna /zigman2/quotes/205619834/composite MRNA -1.69% and BioNTech /zigman2/quotes/214419716/composite BNTX -0.77% — do look pricey. But for them, there’s life beyond Covid-19 now that their science has been proven out. And Covid-19 related demand is not over by a long shot.
One big problem for all of us is that widespread use of vaccines is concentrated in the developed world.
“There are wide swaths of the planet that have not received any supply,” says Steven Slaughter, a biotech expert with Manulife Investment Management.
As long as this persists, those regions will serve as Covid-19 mutant laboratories that may produce more virulent variants that rip through highly-vaccinated countries.
“There is evidence that some variants have the capability to evolve to evade the vaccines,” says Slaughter.
Shares of Moderna, Pfizer /zigman2/quotes/202877789/composite PFE +0.88% and BioNTech fell Wednesday, and extended a decline Thursday, after the U.S. said it will support a proposal to waive intellectual property protections for coronavirus vaccines. The Biden administration will take part in negotiations for the waiver at the World Trade Organization.
People are also going to need booster shots every 12 months for a while, says Jing He, a biotech analyst at Gabelli Funds.
Here’s a look at what this means for investors.
The mRNA leaders
The clear winner in the Covid-19 vaccine contest so far has been messenger RNA (mRNA). This translates our DNA into signals that tell cells what to do. Vaccines based on mRNA tweak the signals to make cells produce antigen proteins that train the immune system to combat Covid-19.
These vaccines work really well. This success — and some concerns about the safety of competing vaccines — helps explain why mRNA leaders Moderna and BioNTech are trading near all-time highs.
But what now?
“The big question is what do they have in the pipeline that can confirm these valuations,” says He, the Gabelli analyst.
After all, things are about to get a lot more challenging for these two on the vaccine front. By definition, the booster market cuts demand in half, since only one shot is needed. Another challenge is not as many people will get vaccines and booster shots next year.
“Maybe half the number of people get vaccinated,” says Jefferies biotech analyst Michael Yee. “So revenue goes down by half because of one dose, and then half again because half the number of people get vaccinated and get a booster,” says Yee.
Moderna and BioNTech may offset this to some degree by raising prices. But will it be enough to allow them to hit analysts’ estimates? Who knows?
“They are really going to have to raise the price to make up that difference,” says Yee.
Meanwhile, competitors are on the way. CureVac /zigman2/quotes/219999729/composite CVAC -1.16% will soon release data on its mRNA vaccine. Yee thinks it will show good efficacy — of around 80%. Novavax /zigman2/quotes/202614340/composite NVAX -2.36% will also soon post data on its vaccine.
Those are some big challenges for Moderna and BioNTech, but there are positives on the horizon, too. Moderna will soon release results of trials that test its vaccines against Covid-19 variants, which Yee thinks will be positive. If so, it will probably have a 2022 combo-vaccine that covers regular Covid and the South African variant.
Next, Moderna will post data on its seasonal flu vaccine in the second half of this year. It if works, there may be a combo Covid-seasonal flu vaccine. An improvement over the typical 40%-50% efficacy for flu vaccines would add interesting upside to the Moderna story since the flu vaccine market is worth $15 billion to $20 billion a year, says He.
And now that mRNA technology has been proven out, it’s worth taking a look at what’s in the pipeline beyond Covid-19.