COVID-19 Continues, But Good Times For mRNA Vaccine Developers Pfizer/BioNTech And Moderna
Feb. 25, 2021 12:47 AM ETPfizer Inc. (PFE)AZN, AZNCF, BNTX...1 Comment Keith Williams
5.43K Followers Summary
Pfizer sees $15 billion revenue from the Pfizer/BioNTech COVID vaccine in 2021 and it could completely change Pfizer’s revenue and earnings trajectory. Think about what this will do for BioNTech.
The above revenues are for the “pandemic phase.” Pfizer/BioNTech may be considering a 3-4x price increase for their COVID-19 vaccine(s) after this phase. Read this sentence again.
Not a lot of progress on treatments, but Viraleze, a convenient nasal spray from Starpharma for prevention/early treatment may complement vaccine programs.
With a change of political leadership in the US and vaccine programs underway around the world, it is a useful time to review where things stand with the COVID-19 pandemic. It has been a very eventful year with now 112 million cases and 2.5 million deaths globally, and the US the most affected country with 29 million cases and more than 500,000 deaths.
Here I suggest that astonishingly successful vaccine programs are opening up interesting investment opportunities, with mRNA vaccine developers Pfizer (NYSE:PFE), BioNTech (NASDAQ:BNTX) and Moderna (NASDAQ:MRNA) worth a close look. On the treatment front there is less upside, although a dark horse might be a preventative/early phase treatment via an antiviral nasal spray from Starpharma (OTCQX:SPHRY).
Vaccines
The global vaccine effort has reached a new phase where a number of vaccines have been scaled up and mass vaccination programs are underway. It isn’t surprising that population-wide vaccination programs have had some teething problems, especially with the Pfizer/BioNTech mRNA vaccine that requires storage at -80C. The Pfizer/BioNTech vaccine development was extraordinary as it was a completely new way of vaccine preparation and the companies succeeded in submitting an Emergency Use Application to the FDA only 248 days after announcing the project. This is truly amazing. And the fact that Pfizer has delivered 65 million doses (29 million for distribution within the US) by Jan 31, 2021, is also extraordinary. A second mRNA vaccine developer Moderna is (NASDAQ:MRNA) close behind the Pfizer/BioNTech program.
The AstraZeneca (NYSE:AZN) vaccine which uses a more conventional viral vector has had a less smooth path to approval, and how effective it will be is yet to be clear.
At this stage there are three major challenges that make a return to “normal” unclear.
Firstly, the US, Europe and South America all have countries struggling to cope with very high numbers of new cases daily, high death rates and health systems suffering. Until case numbers are dramatically reduced, contact tracing and control of new outbreaks is virtually impossible.
Secondly, unprecedented programs for vaccine distribution are commencing. It will take time to get everyone vaccinated. Pfizer expects to deliver 200 million doses of the Pfizer/BioNTech mRNA vaccine to the US by the end of May, and it is possible that they will deliver 2 billion doses by the end of 2021 (enough for 1 billion vaccinated people). Moderna plans to have delivered 300 million doses of its mRNA vaccine by the end of July, while J&J hopes to get FDA approval of its adenoviral vaccine very soon and deliver 100 million doses by the end of June. These and other programs indicate the extraordinary scale up of COVID vaccine production.
Even with these numbers and several vaccines, not only from the West, but also Russian and Chinese vaccines, don’t expect global vaccination to be completed before the end of 2021. This will be a major challenge for opening up global travel.
Thirdly, as expected the SARS-CoV-2 virus isn’t standing still, with a number of mutants now in circulation which look like they impact ease of infection and/or pathogenicity. And the first reports of hybrid variants that could amplify the dangers of SARS-CoV-2 have appeared. This means that each of the vaccines currently being scaled up and released will need to be constantly monitored and most likely updated versions prepared (with new regulatory approvals needed). There will almost certainly need to be booster vaccinations within the next 2 years.
The result for Pfizer/BioNTech looks like $15 billion COVID vaccine revenue in the coming year. To provide context for the impact of this revenue on the overall Pfizer business, projected annual revenue not including the COVID vaccine revenues is predicted to be in the range $44.4-46.6 billion. So the COVID contribution isn’t small. Pfizer estimates the income from COVID vaccine before tax to be in the high 20% range.
The question is how long this scale of revenue is likely to last. The view of Pfizer CEO Dr. Albert Bourla is : “I think COVID has a very good chance that could completely transform the revenue and earnings trajectory of this business starting from now.” The $15 billion revenue is based on special (low) pandemic pricing. Perhaps the reason why Pfizer’s CEO is saying that this is going to be a really big deal is that already there is discussion within Pfizer (and presumably BioNTech?) for a substantial increase in the pricing of the COVID vaccine after this initial pandemic phase is over (maybe 3-4 times the current price of $19.50/dose).
For comparison Moderna’s vaccine is currently $15/shot, J&J’s proposed vaccine is $10 and AstraZeneca’s vaccine costs $4/shot. Note that the Pfizer/BioNTech vaccine was developed separately from Government funding (and it was the first vaccine to be approved), while other vaccine developers received at least some assistance for their vaccine developments.
A recent report suggests that the Pfizer/BioNTech vaccine may be relatively ineffective against the South African SARS-CoV-2 variant. I think that the demand for the existing Pfizer/BioNTech vaccine is so great that notwithstanding the storage disadvantages, they will sell all they can make at the moment. Having to produce a new version for variants sounds like a great problem to have from a commercial perspective.
The Pfizer/BioNTech agreement involves a 50/50 gross profit split, so the implications for BioNTech are likewise huge.
A report that seems to have been overlooked is good news for the Pfizer/BioNTech vaccine. It has been reported that the vaccine can be stored for 2 weeks at normal freezer temperature (-20C rather than -70C). This provides an intermediate storage situation to expand the initial Pfizer recommendation of 6 months at -70C and 5 days at 2-8C (refrigerator). This is a big deal as it will give the vaccine a much bigger distribution horizon. Also it looks like the Pfizer/BioNTech vaccine could potentially be sufficiently effective with just one dose, although this needs to be confirmed.
Without being alarmist, prudent investors need to factor in that the pandemic is not going to miraculously disappear. Of course this has implications for economic recovery, but it might mean a longer profit horizon for Pfizer and BioNTech as they provide modified versions of the vaccine. We don’t yet know how long any of the vaccines are effective for, but there seems a good chance that an annual COVID vaccine might become how this plays out long term.
Much of the above discussion about the Pfizer/BioNTech vaccine applies to the Moderna vaccine as both are mRNA vaccines. Based on the Pfizer figures, a suggestion that Moderna’s COVID-19 vaccine revenue might be $11 billion in 2021 has some credibility. However, Shock Exchange has recently published a more pessimistic view of the Moderna program, concluding that the current Moderna valuation is untenable.
I take the above discussion about the Pfizer/BioNTech vaccine program seriously and I also think that the Moderna program likewise deserves serious consideration. The AstraZeneca program is more problematic as there are some question marks about the efficacy of that vaccine especially in relation to a South African variant of SARS-CoV-2. Programs from Novavax (NASDAQ:NVAX) and J&J (NYSE:JNJ) are yet to be approved and so consideration of these vaccines is premature, but as Shock Exchange suggests these programs need to be taken seriously by potential Pfizer, BioNTech and Moderna investors.
From an investment perspective, focus on investable companies is obvious, but in considering market conditions for investment in general (e.g., is international travel possible?) it is worth noting that both Chinese (40 million vaccinations by February 9) and Russian vaccine developments are leading to very large numbers of people getting vaccinated with vaccines that are effective. China has already provided COVID vaccines to 22 countries and Russia claims 1.2 billion orders for its effective Sputnik V COVID vaccine although actual doses delivered in Russia and some 53 customer countries is unclear. Note that the US has vaccinated 64 million of its citizens.
Treatments
Differing from the outstanding progress with vaccine developments, the search for COVID-19 treatments has met with more limited success. Of course better understanding of disease progression and how to focus patient care has led to substantial reduction in mortality. Having healthcare systems better organised to cope is a significant part of this success.
Treatment of late stage COVID-19
There has been good success in finding a treatment (dexamethasone) for end stage COVID disease, but it is tricky because if used too early it can make things worse (i.e. increase mortality).
Treatment of COVID-19 prior to (and to prevent) hospital admission
At the other end of the spectrum, monoclonal antibody treatments to prevent hospitalisation have some indications of usefulness, but again the timing of the treatment is tricky. The reality is that the two main candidates bamlanivimab (LY-CoV55) from Eli Lilly (NYSE:LLY) and casirivimab plus imdevimab (REGN-COV2) from Regeneron (NASDAQ:REGN) have been underutilised and are likely to be of limited commercial value for the relevant companies. They are expensive drugs and only have utility for very early stage disease, out of a hospital setting, yet they are administered by intravenous injection. I doubt that even if effective these monoclonal antibody treatments will compete with nasal sprays under development that are likely to target the same issues (see below).
Treatment of hospitalised patients
In between there is Gilead’s (NASDAQ:GILD) Remdesivir, which was thought to offer some utility by reducing hospital stays, but a subsequent trial led the World Health Organisation to conclude that Remdesivir offers no benefit and therefore it recommended against its use. However, based on other studies the FDA approved use of Remdesivir for hospitalised patients. Given that there aren’t other drugs for serious (but not end of life) COVID-19 disease, Remdesivir has had significant sales ($1.9 billion in Q4 2020) and Gilead projects 2021 sales of up to $3 billion. I’m not convinced about the value of Remdesivir for COVID-19 treatment.
COVID-19 is a new disease and there is a steep learning curve to understand how to manage it at different stages and also to understand the risks for individuals with different age and wellness profiles. There are no shortcuts, but new insights come from careful analysis, such as understanding why children are less affected than adults. Investors need to keep a lookout for companies that make new discoveries that can be productised with new medicines.
Prevention/treatment of initial infection
One interesting area for prevention/early treatment involves the development of antiviral nasal sprays. As indicated below there seems interesting potential for this class of treatment to complement vaccine programs.
Starpharma’s Viraleze
No nasal spray products have yet been released, but Australian biotech company Starpharma has just announced that its nasal antiviral product Viraleze has been successfully registered for sale in Europe (including the UK). This registration covers the European Economic Area, which includes 27 countries in the EU, UK and European Free Trade Association countries. This comprises a total population of ~520 million.
Viraleze is expected to be released for online consumer sale in Q1 CY2021 (March) in the UK and throughout Europe. Starpharma will shortly after release Viraleze for sale over-the-counter in pharmacies. B2B discussions with relevant customers (aged care, travel providers, healthcare organisations, etc.) are underway. Manufacture and other launch preparations for Viraleze have been completed in Europe. Marketing in Europe indicates strong interest in a risk minimisation nasal spray that is room temperature stable and can be conveniently administered in busy public areas where risk of infection occurs (public transport, lifts, planes, bars, restaurants, etc.) as well in crowded environments and some workplaces.
SPL7013, the active ingredient of Viraleze, is a broad spectrum antiviral (and antibacterial) product that has been launched for treatment and prevention of female health product VivaGel in more than 40 countries. In an ironic twist VivaGel FDA approval has been delayed in the US by urgent actions on the COVID pandemic. This explains the current focus on Europe where VivaGel is already being marketed widely.
Of particular note, Viraleze inactivates SARS-C0V-2 (more than 99.9%) within 1 minute and it also has the potential as a post-exposure treatment.
Of relevance to Viraleze possibly complementing vaccination, a key point about vaccines is that they don’t prevent infection. Instead they prevent the disease. So it is possible that people who have been vaccinated may be infectious. Therefore there is still a need for a preventative. Indeed there is some evidence that viral load might be critical for passing on the virus, so a treatment like Viraleze, which addresses viral load in the nasal passages, may have an important role in combination with vaccination.
Other antiviral nasal sprays being evaluated as anti-SARS-CoV-2 sprays Nasodine
Two years ago Australian Biotech company FirebrickPharma concluded Phase 3 trials of Nasodine (povidine-iodine) as a broad spectrum antiviral for treating/preventing the common cold. In 2020 FirebrickPharma announced that Nasodine kills 99% of the SARS-CoV-2 virus in the test tube and there is a likelihood of effective control in humans, although clinical trials have not been conducted and the Australian Government indicates caution until trials have been conducted and TGA approval obtained. Although there is limited information from the company, it is managed by an experienced team that has been involved in significant developments in managing respiratory disease.
Clearly, the COVID-19 use is a new opportunity. It seems that there is interest from China in evaluating Nasodine. The indication from the company is that Nasodine has only minor side effects of throat irritation and stinging in the nose. Whether this will be an impediment to the development of Nasodine depends on how significant these side effects are. Like Viraleze, Nasodine is stable at room temperature.
US/Dutch collaboration on a lipopeptide that prevents SARS-CoV-2 transmission in ferrets
A scientific paper published in November 2020 showed that infection is prevented in ferrets by daily nasal treatment of a novel dimeric-lipopeptide. This is a simple small molecule compound that is stable and non-toxic. The lipopeptide blocks the virus binding to cells in the nose and hence infection. The US and Dutch groups have been developing this new class of drugs in studies with other viruses.
Human trials need to be conducted and methods developed for scale up of synthesis, but this is another interesting compound that could be useful for preventing COVID-19 infection in risky situations. The lipopeptide blocks a specific region on the SARS-CoV-2 spike protein which is important for infection. It has been tested with four SARS-CoV-2 strains. Since the COVID-19 vaccines are based on the spike protein, it remains to be seen whether the lipopeptide prevents infection by all SARS-CoV-2 variants.
A possible reason that the lipopeptide might have a favoured status in the US is its local origin. Given the serious situation in the US one might expect that any local COVID treatment might be accelerated. However, against this is the need to get through the FDA regulation process and also whether US customers might be attracted to a treatment that requires their engagement.
What does progress with vaccination and treatments mean for economic recovery
From the foregoing, it is clear that despite inadequate treatments and the fact that vaccination is just starting, many countries have restored some normality to their economies, although constant vigilance is necessary. It is clear that those countries that prioritise economics before addressing the pandemic have done poorly and these countries remain in a tough position. Simply put prioritising economic activity exacerbates the economic problems, while addressing the pandemic allows some semblance of normality (subject to lockdowns etc where outbreaks occur). The new Biden administration has control of the COVID-19 pandemic as its key initial goal. It is clear that Biden’s administration is using an evidence-based approach to control of the pandemic.
The fast pace of vaccination efforts all around the world provide the basis for some optimism that we are at the end of the beginning. The risk currently is that with large numbers of people vaccinated the need for continued behaviour modification may be ignored, with the risk of a third serious wave of infections. We are not out of the woods yet.
Conclusion
The tough news is that the virus is still in charge and humans need to accept that ignoring the virus and hoping for the best invariably means that the outcomes are bad. The euphoria in the markets about return to normal is most probably premature as there is a way to go yet. There were 71,054 new COVID-19 cases in the US yesterday and 2,404 deaths.
While this is substantially down from the recent disaster of hundreds of thousands of new daily cases and 4,000+ daily deaths in the US, there is still a major pandemic out there. And it is important to be aware that the reduction in cases now is almost certainly not due to vaccination (not time for vaccination effect to be seen) but due to seasonal change. Expert advice is that if people don’t continue to be vigilant there is a strong chance of a 3rd wave at the end of the Northern Hemisphere summer, especially if vaccine resistant variants get established.
In terms of investment in COVID-related issues, the big news concerns effective vaccines becoming available. Of interest to vaccine-related investment, there is also evidence that there is going to be an ongoing need for revaccination with new versions of vaccines that address changing virus characteristics. This means that the investment opportunity in the vaccine area has become more concrete. My take is that the mRNA vaccines from Pfizer/BioNTech and Moderna offer interesting opportunities for investment.
As far as treatments go, dexamethasone seems to be satisfactory for end stage disease and there seems less pressure for better, more expensive options. Treatments for earlier stages (especially monoclonal antibody treatments from Eli Lilly and Regeneron and mid-stage Remdesivir treatment) are problematic with timing issues and no clear treatment options available that provide major protection. Where things might change is for prevention/very early stage treatment to reduce viral load as a vaccination adjunct.
No treatments in this space are yet available, although Starpharma has recently received EU regulatory approval for its Viraleze and this product will become available to a population of ~520 million in the European Economic Area this quarter. It will be interesting to see if this gets widely adopted as a complement for vaccine treatments.
I am not a financial advisor but I’ve been in the biotech industry for a long time, first as a researcher and then as a company founder. If my commentary helps shape you and your financial advisor’s perspective on investment related to the COVID pandemic, please consider following me. Note that I am a long time investor in Starpharma.
Disclosure: I am/we are long SPHRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Publish kthor
Today, 12:54 AM Comments (1.33K)
"Pfizer/BioNTech may be considering a 3-4x price increase for their COVID-19 vaccine(s) after this phase"
competition following or staying with current pricing?
Reply
SPL Price at posting:
$2.15 Sentiment: Buy Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)