This is a big week in the fight against the 2019 coronavirus disease pandemic (COVID-19). On Monday, December 14, the first-ever COVID-19 vaccine approved by the U.S. Food and Drug Administration (FDA) for emergency use was administered to millions of front-line workers across the country. This is because COVID-19 deaths per day in the US exceed 3,000.
There are currently about two dozen COVID-19 vaccines and treatments in development, all of which can help reduce or end the pandemic.
Vaccine developers deliver incredible efficacy
The first vaccine to receive an emergency use authorization (EUA) from the FDA is Pfizer‘s (NYSE: PFE) and BioNTech‘s (NASDAQ: BNTX) BNT162b2. In mid-November, Pfizer and BioNTech reported a primary vaccine effectiveness of 95% in their late phase of study. This is currently the peak of efficacy for the COVID-19 vaccine. About 2.9 million doses of BNT162b2 were shipped to more than 600 predetermined locations this week to inoculate first-line workers.
However, the benefit of Pfizer / BioNTech as a first-mover will likely be short-lived. On December 17 Moderna (NASDAQ: MRNA) Its vaccine candidate, mRNA-1273, is expected to be reviewed by an FDA advisory panel. In the late COVE study, the Moderna vaccine provided a primary efficacy of 94.1%. If it got a positive recommendation from the panel – the Pfizer / BioNTech vaccine was recommended for approval with a vote of 17-4 (with one abstention) – it wouldn’t be surprising to see up to 20 million doses shipped within days .
Not to mention, AstraZeneca (NASDAQ: AZN) and Oxford University also reported the efficacy of their COVID-19 candidate in November. A cohort that received two full doses at least one month apart showed a vaccine effectiveness of 62%. A separate cohort, which received an initial half dose followed by a full dose at least one month apart, showed 90% efficacy. While the combined efficacy of these two arms was “only” 70%, AstraZeneca’s plan to sell its vaccine at cost (about $ 3 to $ 4 per dose) could be more than enough to entice use.
According to Evercore ISI analyst Josh Schimmer in August, COVID-19 vaccines could be worth up to $ 100 billion in sales and $ 40 billion in after-tax profits. Figures like these are exactly why vaccine developers are a hot commodity on Wall Street.
Still, there is one exceptionally important figure that no one seems to be talking about – but they should be.
Wall Street overlooks one monumental factor: choice
In May, as researchers were still trying to find out all about COVID-19, Pew Research Center asked Americans about their willingness to take a vaccine, if one was approved today. About 72% of the respondents were in favor of the vaccine. But in September, when Pew asked a new group of respondents the same question, only 51% would be “sure” or “likely” to receive the vaccine. The percentage of respondents who “definitely” intends to receive the vaccine has even been halved (42% in May versus 21% in September).
On July 1, 2019, the US Census Bureau estimated that 77.7% of the 328,239,523 people in this country were 18 years of age or older. If Pew’s poll reflected the views of Americans across the country, that would be nearly 125 million adults who don’t feel like getting the vaccine.
For Pfizer / BioNTech, Moderna and AstraZeneca / Oxford, a full course of treatment includes two doses. The treatment cost is $ 39 for Pfizer / BioNTech, between $ 50 and $ 74 for Moderna, with the price difference depending on how much vaccine a buyer (i.e. land) buys, and between $ 6 and $ 8 for AstraZeneca / Oxford, which have chosen to sell at cost. If we arbitrarily assume that each vaccine developer is responsible for a third of the U.S. market, we’re talking more than $ 4 billion in missed total addressable opportunities … only in the United States.
The fear of a coronavirus vaccine may have to do with the record time in which these treatments were developed. While the primary efficacy was good off-the-scale, we do not yet know whether receiving a vaccine will stop transmission or, more importantly, how long these vaccines will protect the recipient. Without answers to these questions, we could be talking about tens of billions of dollars in missed global opportunities.
Betting on COVID-19 stocks is risky
While it is clear that vaccines provide a way to end the pandemic, buying pharmaceutical and biotechnology stocks may not be such a good idea just because they are developing a coronavirus vaccine.
For advanced developers such as Pfizer, AstraZeneca or Johnson & Johnson (NYSE: JNJ), there are extensive portfolios of branded drugs and devices to fall back on. But for clinical stage developers like Moderna and Novavaxeuphoria seems to be getting the better of investors.
Take Moderna as a good example. The company’s valuation has exploded to more than $ 61 billion in hopes that mRNA-1273 will generate more than $ 10 billion in annual sales. While this is a real possibility in 2021, sales of Moderna are likely to decline each subsequent year as new treatments hit the market. It’s worth noting that some of these mid- and late-stage players may have some competitive advantages over Moderna. For example, the Johnson & Johnson vaccine only needs to be administered in one dose. If it achieved comparable efficacy to mRNA-1273, Moderna’s vaccine would be phased out.
As I described earlier, Moderna is also valued north of 10 to 12 times the Wall Street consensus sales forecast for 2023. Biotech stocks are typically valued in the 3-6 times peak annual revenue range.
In short, skepticism is warranted now that Wall Street may be overestimating addressable opportunities for these companies.