The Vaccinators – Some vaccine developers have fared better than others

Some pharmaceutical companies have managed to develop a coronavirus vaccine in record time, while others have given up. And the share price performances of even the successful vaccine developers have greatly diverged. Victor Hill investigates.

A race against time

Here in the UK, we have just passed the peak of the second wave of Covid-19 infections. At the beginning of February new hospitalisations and daily fatalities appeared to be in gentle decline. As we know, the vaccination programme is being rolled out apace with 9.6 million people having had a first jab and about half a million having received their second jab by Tuesday (02 February) when the vaccine roll-out to care homes in England was declared completed.

The health emergency is far from over, however. There had been over 108,000 deaths attributed to Covid-19 by that day – so this pandemic is the worst to hit Britain (and indeed most other first world countries) since the Spanish flu pandemic which killed an estimated 228,000 people over 1918-19.

There are currently three vaccines available licensed by the respective regulators in the UK, the EU and the USA. These are, in chronological order of approval, the Pfizer-BioNTech vaccine, the Oxford vaccine produced by AstraZeneca and the Moderna vaccine. The Oxford vaccine uses a reasonably tried-and-tested modified virus technology, whereas the other two apply the revolutionary messenger RNA technology. A fourth vaccine, developed by Novavax, is likely to gain approval shortly across all three jurisdictions. There will be others.

It is useful to review the major players in this space. If I am right – as I have argued in these pages and in my recent webinar – that we are going to all be vaccinated on a regular, (probably annual) basis going forward, then the ownership of successful coronavirus vaccine represents huge cash flows stretching years into the future.

Pfizer (NYSE:PFE)

The latest Israeli data suggests that the Pfizer-BioNTech vaccine is 92 percent effective. According to the Israeli healthcare provider Maccabi, only 31 out of 163,000 vaccinated Israelis developed Covid-19 post-vaccination. A control sample of equivalent size saw 6,437 unvaccinated people contract the disease over the same time period.

Despite the enormous success of Pfizer’s collaboration with its German partner, BioNTech, Pfizer’s share price has hardly moved at all over the last year. It seems that most of the technical kudos has accrued to BioNTech, while Pfizer has taken the flack for production bottlenecks.

BioNTech (NASDAQ:BNTX)

The niche German biotech powerhouse has seen a tripling of its share price over the last 12 months as it has basked in glory in its native Germany, across Europe and the world. The revolutionary messenger RNA (mRNA) technology was conceived by its two founders – Wunderkinder husband and wife team Dr Uğur Şahin and Dr Özlem Türeci.

The British government has purchased 40 million doses of the Pfizer-BioNTech vaccine at a cost of about £21 per double shot. The vaccine must be stored at super-cold temperatures at minus 70 Celsius so cannot be stored in conventional freezers.

A brand new BioNTech manufacturing plant will start operations later this month which will significantly increase the production capacity of the vaccine.

AstraZeneca (LON:AZN)

The AstraZeneca or Oxford vaccine (because it was developed in collaboration with the Jenner Institute at Oxford University) requires two shots ideally 28 days apart, although the UK government has decided to extend the gap between doses to 12 weeks in an attempt to optimise population immunity in the first stage of the vaccination programme. It costs just less than £3 for two doses. The UK government ordered 100 million doses of the proto-type vaccine back in May last year – just as the first wave of the virus attenuated. It is thought to have an efficacy of about 70 percent against symptomatic Covid infection.

It has still not yet been confirmed whether the Oxford vaccine works with sufficient efficacy against the Kent and South African mutations of the virus. But today (03 February) a new study suggests for the first time that the vaccine has a substantial effect on transmission.

AstraZeneca’s share price this week is much the same as it was exactly 12 months ago. The markets have noticed that the efficacy figures for the vaccine are lower than others. Last week there much sceptical talk in Europe (see below) about the Oxford vaccine; in Australia, where a vaccine roll-out has not yet even begun, there is doubt about whether to place an order at all (which would not be fulfilled for some time, anyway). If the efficacy data – which is likely to be forthcoming in the UK at least by Easter – exceeds expectations, it is quite possible that the company’s share price could benefit appreciably.

Moderna (NASDAQ:MRNA)

Moderna’s mRNA vaccine requires two doses 28 days apart at a cost of £26. The UK government has ordered 17 million doses, but delivery is not expected in the UK until late spring. The estimated efficacy is a stunning 94.1 percent against symptomatic Covid and 100 percent against severe Covid.

The US company’s share price has appreciated by over 680 percent in the 12 months to 01 February.

Janssen (owned by Johnson & Johnson (NYSE:JNJ))

The Belgian subsidiary of the veteran US pharmaceutical and consumer products giant is on course to get authorisation for its single-dose vaccine in the three jurisdictions shortly. That will mean that five of the seven vaccine producers backed by the UK government will have succeeded. The UK government has ordered 30 million doses. The company claims to have the capacity to produce one billion doses a year.

According to data released last week, the Janssen jab will have 66 percent efficacy against symptomatic Covid-19 but probably certain immunity against hospitalisation and death. The jab works in a similar way to the Oxford vaccine, being designed to provoke an immune response against the coronavirus spike protein by means of a viral vector. It is safe to store and transport at standard refrigeration temperatures. It is likely to cost the UK government £6.20 a shot.

Johnson & Johnson’s share price had risen by just 7.7 percent on a 12-month basis. One should consider that it is a huge, diversified conglomerate and that vaccine production represents a relatively small proportion of its total revenues.

Novavax (NASDAQ:NVAX)

On 28 January, Novavax announced the results of its vaccine trials. Its vaccine has proven to be 89.3 percent effective. Encouragingly, it works against both the original strain of SARS-CoV-2 and the recent Kent mutation which I wrote about last week. It requires two shots a recommended 21 days apart. The results of these trials have now been submitted to the UK regulator, the Medicines and Healthcare Regulatory Agency (MHRA) for analysis and, hopefully, swift approval.

The Novavax vaccine differs from others in that it combines an engineered protein from the virus that causes Covid-19 with a plant-based ingredient that helps to generate an augmented immune response. Professor Paul Heath, one of the leaders of the UK Novavax vaccine trials, said last week that a 12-week delay between jabs could result in greater immunity in the long-term.

The UK government has pre-ordered 60 million doses of the Novavax vaccine, which will be manufactured at its plant in Stockton-on-Tees, County Durham. They will cost £23 for two doses. Novavax would have been a stunning investment for investors who bought its shares 12 months ago at the then price of $6.81. They closed on Monday at $264.49, representing a return over one year of over 3,800 percent.

Merck (NYSE:MRK)

Merck, the US pharmaceutical giant known as MSD outside America, announced on 25 January that it was dropping out of the vaccine race. It admitted that its jab had failed to stimulate a sufficient immune response in patients in early-stage clinical trials. The immune response generated was weaker than in patients who had already contracted SARS-CoV-2. The two single-dose vaccines that Merck was working on were based on technology the company had deployed to develop other vaccines, including its successful Ebola jab. Merck was collaborating with the research organisation IAVI.

The company has decided to focus on the development of therapeutic treatments for Covid-19 rather than on a new vaccine in collaboration with a small biotech firm called Ridgeback Biotherapeutics. These include anti-viral drug cocktails – something rival pharma giant Eli Lilly (NYSE:LLY) is also working on. Its share price dropped by about 1.5 percent on the announcement, and indeed stock markets all around the world wobbled by a percent or so. On a 12-month basis Merck’s shares were down by 10.7 percent on Monday.

Sanofi (EPA:SAN)

Sanofi is the largest producer of vaccines in the world by revenues, though by volume that honour belongs Serum Institute of India (SII). It employs over 100,000 people in over 100 countries. The French giant set out to develop a coronavirus vaccine in collaboration with the UK’s GSK. On 11 December Sanofi and GSK announced a delay in their adjuvanted recombinant protein-based Covid-19 vaccine programme because it did not produce sufficient immunity in the elderly.

Sanofi’s vaccine is based on existing technology that it uses for its flu vaccine. This works by presenting the immune system with parts of a dead virus so that it can recognise and attack the intruder. The current state of play is that its vaccine is not likely to gain approval until the end of this year. Last week Sanofi announced that it would provide BioNTech access to its state-of-the-art production infrastructure from the summer of this year.

Although its share price has recovered some of the losses incurred after the December announcement, year-on-year it is down by over 10 percent.

GlaxoSmithKline (LON:GSK)

GSK is a global pharma giant with £4.3 billion in revenues last year. In Q3 2020 the coronavirus vaccine was one of 18 vaccines under development. Unfortunately, its share price has been on a downward trend since April last year (the month that it announced the collaboration with Sanofi). By Monday this week GSK had lost nearly 25 percent of its February 2020 value, making it the worst performing vaccine stock of the pack.

Valneva (EPA:VLA)

On Monday (01 February), the UK government ordered an additional 40 million doses of a coronavirus vaccine from the French pharmaceutical company Valneva, that should become available later in late 2021-early 2022. This is another indication that the government anticipates the need to revaccinate people next winter and beyond.

Valneva’s vaccine is still undergoing trials. Although these will take time to conclude, manufacturing at a plant in West Lothian, Scotland, has already begun. The plant employs 100 scientists and technicians.

In share price terms this relatively small player has been a star performer, posting gains of 285 percent year-on-year to earlier this week.

Zoetis (NYSE:ZCS)

Zoetis Inc., based in New Jersey USA, claims to be the largest animal health company globally and is a major player in the field of animal vaccines. Since the SARS-CoV-2 virus mutated in Denmark in mink farms it has been working on a vaccine for these animals so that they cannot re-infect humans. Its share price is up 15 percent on a 12-month basis.

The Chinese and Russian vaccines

The Chinese vaccine, Sinovac, was trialled in Brazil. While most phase three vaccine trials identified only people with Covid-19 symptoms post-vaccination, this trial also tracked people who tested positive but remained asymptomatic. When this latter group was included, the efficacy of the vaccine fell from 78 percent to 50 percent. Nevertheless, the vaccine is being administered in many Asian countries, notably Indonesia as well as in China itself.

The Russian vaccine, known as Sputnik-V (V being for “Victory”), is being rolled out across the Russian Federation and has been purchased by at least 16 countries including Argentina, Venezuela, Hungary, UAE and Iran. The vaccine was created by the Gamaleya National Centre of Epidemiology and Microbiology, a medical institute located near Moscow. It was criticized in Europe for having been fast-tracked without publishing trial data – and there were questions asked about the ethics of using conscript soldiers in trials. Unlike other two-shot vaccines, it uses different formulas for the first and second shots.

On Tuesday The Lancet published reviewed Russian data which confirms that the Sputnik vaccine is 91.6 percent effective, making one of the most efficacious in the world. The Russians also think that two shots of different vaccines – suggesting one Oxford, one Sputnik – would be the best way to combat future mutations. It seems that AstraZeneca is already in talks with the Russians on this proposal.

Vaccine Wars

The UK has secured firm orders for 407 million doses of different coronavirus vaccines – more than enough for the entire UK population, for this year at least. In contrast, the situation in Europe has been characterised by widespread shortages, not least in France. The department of Haute Garonne announced this week that its entire vaccination programme would be halted temporarily.

During the week of 25 January, it became clear that the European Commission, which has arrogated to itself the responsibility to supply coronavirus vaccines to all 27 members of the European Union, was in a bitter dispute with AstraZeneca over the supply of the Oxford vaccine. Even though the vaccine at that point had not yet been approved by the European Medicines Agency (EMA)).

It turned out that the UK government had placed an order for 100 million doses of the Oxford vaccine back in May last year while the EU did not sign a contract with AstraZeneca until August. Bear in mind that when these contracts were signed the vaccine was still under development and no party could be sure that a successful vaccine would be forthcoming, let alone when it might be licensed and in what quantities it could realistically be produced. The contracts were therefore signed on a reasonable best-efforts basis. In other words, AstraZeneca would deliver the order if and when it could.

Last week, the EU Commission under Frau von der Leyen formed the impression that AstraZeneca would only start shipping supplies of its vaccine to Europe after it had fulfilled its UK order – that is on a first-come-first-served basis. That was never the case – but Brussels announced plans to halt the export of the Pfizer-BioNTech vaccine (which is manufactured in Belgium) to the UK in retaliation. Its ban did not stretch to other neighbouring countries such as Iceland and Morocco.

Then, last Friday (29 January) the Commission decreed that it was excluding Northern Ireland from the EU single market under Article 16 of the Northern Ireland Protocol, which it has previously insisted was essential for peace on the island of Ireland. This was intended to prevent any seepage of the Pfizer-BioNTech vaccine across the Irish border into the UK and was done without any consultation with Dublin, Belfast or London (or with Berlin for that matter). A diplomatic storm erupted immediately, and Frau von der Leyen was forced to make a humiliating climb-down the same day – though not before AstraZeneca’s plant in Belgium was visited by unscheduled inspectors. The Commission President’s discomfiture has not gone unnoticed in her native Germany.

As if that were not shocking enough, the Europeans have been rubbishing the very vaccine that they are apparently so keen to obtain. The German newspaper Handelsblatt asserted that the Oxford vaccine has an efficacy of just eight percent in the over-65s. This misinformation (fake news, if you will) was probably based on the statistic that the over-65 demographic made up about eight percent of the original trial population (341 people in fact).

Then, on Friday (29 January) President Macron told a gathering that the Oxford vaccine was “quasi-ineffective”. This utterance in a country where anti-vaxxer sentiment is the highest in Europe was deeply irresponsible. The truth of the matter is, of course, that the French are resentful of the fact that their own vaccine candidate, Sanofi, has stalled and that les Anglo-Saxons have be able to produce a viable vaccine at scale unprecedentedly quickly.

The Europeans’ petulance is aimed at the only pharmaceutical giant which is offering the vaccine globally on a not-for profit basis and whose products costs about one tenth of the Pfizer-BioNTech vaccine. By licensing the Serum Institute of India to manufacture the vaccine at the largest vaccine plant in the world – in Pune outside Mumbai – AstraZeneca will ensure that developing countries get supplies of the vaccine soon. For their part, the British have taken the moral high ground by promising vaccine doses to the Republic of Ireland as soon as a surplus arises.

The Prognosis

None of the available vaccines is going to be 100 percent effective at stopping serious illness – some people who have been vaccinated will continue to succumb to Covid-19, especially if current restrictions are relaxed and social distancing is abandoned. As a report by the University of Warwick pointed out last weekend that, even if you vaccinate 85 percent of the population (ambitious, given the number of vaccine refuseniks and the number of people who, such as illegal immigrants, will fall through the cracks), and the vaccine turns out to be 90 percent effective, that will still leave one quarter of the total population who will remain susceptible. That could be sufficient to trigger a third wave of the virus next year, according to Warwick’s model.

And, despite the report out this morning, we still don’t know the extent to which vaccinated people will continue to transmit the disease – though, hopefully, hard data on this will become available shortly. Currently, many experts expect the vaccines collectively to be around 60 percent effective in stopping transmission, but it could be less.

Some models suggest that Britain could achieve herd immunity with 70-80 percent of the population inoculated by the early summer – but this is questionable. What is clear is the vaccine developers will have to continue their research to guard against any future mutations in the virus. Potentially, there may be vaccines with two variants of the spike protein which could be used as booster doses.

The UK government has set aside £3.7 billion so far for the purchase of 350 million vaccine doses manufactured by the companies mentioned above; but the Vaccine Taskforce is evaluating another 200 vaccine candidates. The manufacture of coronavirus vaccines will remain a massive endeavour for the foreseeable future. Some players in this space will prove outstanding investments.