Danger Is Approaching for Coronavirus Vaccine Stocks -- Heard on the Street
September 29 2020 - 3:42PM
Dow Jones News
By Charley Grant
The Covid-19 vaccine race appears to be entering the home
stretch. For biotech investors, the trouble could be just
beginning.
Despite a recent pullback, biotech investors are pricing in
multiple Covid-19 vaccine breakthroughs in the near future. Pfizer
and its partner BioNTech could have late-stage clinical data as
soon as the end of October, while data from Moderna is expected
soon after. Johnson & Johnson and Novavax have also recently
begun their own late-stage trials and could have data within a few
months.
Optimism abounds: Moderna's shares have more than tripled so far
this year, while Novavax stock has surged more than twentyfold. The
so-called "vaccine trade" has become very popular with retail
investors. After all, the federal government has opened its
checkbook to companies trying to develop vaccines. What's more, the
total addressable market includes all of humanity, at least in
theory.
That euphoria belies the volatile nature of drug development:
The vast majority of drug candidates never reach the market. Those
that do often suffer unpredictable bumps in the road. Potential
safety or efficacy issues can emerge at any point in the
development process.
For the vaccine trade, this isn't just a theoretical risk:
Inovio Pharmaceuticals on Monday said a planned vaccine trial would
be delayed due to questions from regulators. Earlier this month,
AstraZeneca paused its vaccine trials after a patient became ill,
though it has since resumed some of them. Such snags are
commonplace, but can be very painful: Inovio shares fell 28% on
Monday and have lost about two-thirds of their value in three
months.
The risks to investors don't necessarily evaporate even with
successful results. The massive vaccine funding effort, which has
been a boon for the sector, could become less advantageous for
individual stocks as competition comes into focus. Differentiation
among vaccine candidates has yet to harm stock prices, but
investors should look for that dynamic to change. Without
late-stage data to evaluate, it is impossible to say who is winning
or losing the race.
A drug that is sufficiently safe and effective to receive
emergency authorization from the Food and Drug Administration won't
necessarily be widely distributed if a competitor has superior
data. Then there are important drug delivery issues to consider:
for instance, both the Moderna and the Pfizer and BioNTech vaccine
require a booster shot, but the Johnson & Johnson treatment
doesn't
The risks don't vanish even for the winner of the race, should
one emerge. While the federal government will control any vaccine
distribution effort at first, it is unclear how many people will
actually take the vaccine once it's available for average
consumers. It will be incumbent on any manufacturer to persuade the
public that the shot is worth getting.
Spreading bets around could help, but that strategy also has
limits. Some smaller developers have no product sales and would
benefit greatly from a blockbuster sales opportunity. But for
larger companies, that benefit is more modest. Pfizer booked nearly
$12 billion in sales in the second quarter alone, for instance.
Even a true blockbuster candidate will have a muted impact on total
profits.
Don't be surprised if this shot ends up stinging.
Write to Charley Grant at charles.grant@wsj.com
(END) Dow Jones Newswires
September 29, 2020 15:27 ET (19:27 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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