The world is desperate for a COVID-19 vaccine. The United States government is giving away billions of dollars in donations in the hope that someone, anyone, will find a vaccine that works and defeat this terrible disease. And so far, anyway, investors in this sector have done well.
In the first half of 2020, all you needed to get incredible returns was to own a small-cap biotech vaccine; the market rewarded virtually anyone with a vaccination platform. If you are a small biotech, how do you double your share price? Announce that you are looking for a COVID-19 vaccine. And what happens when you find your candidate? Your share price doubles again. And what happens when you enter Phase 1 testing? Your share price doubles again.
You may think that I am exaggerating, but in any case, I am understanding what happened. Novavax (NASDAQ: NVAX) It was up 3,429% this year. Mathematicians can tell me how many doubles that It is, but I’m pretty sure there are more than three.
It has been a wild and crazy journey. And it is still happening. Novavax rose another 16% yesterday.
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What will block a biotech stock of the coronavirus vaccine?
Biotech companies are heavily regulated by the government. Each and every drug in the US must be approved by the Food and Drug Administration (FDA) before they can be sold to the public. Historically, this regulatory process could take seven years or more. Because we are in the midst of a global pandemic emergency, this timeline is being dramatically shortened for COVID-19.
For example, Modern (NASDAQ: MRNA) He has developed his candidate vaccine, tested it on animals, tested it on people, and is now preparing for a phase 3 trial, the final stage before filing a new drug application with the FDA. The company accomplished all of this in just six months.
That’s one reason Moderna stocks increased 385% in the first half of the year: The regulatory process has been heavily compressed for coronavirus vaccines. The surprising jumps in share prices coincide with the speed with which these candidates march through clinical trials. Normally, it would have taken Moderna half a decade to approach a phase 3 trial.
This regulatory speed is due to the emergency nature of a global pandemic that has killed some 600,000 people worldwide. But of course, the FDA has no interest in approving a vaccine that doesn’t work, or is poor. Therefore, we should not understand that the rapid pace of early regulatory testing means that the FDA has lowered its standards.
In fact, none of these vaccines has yet been approved. The market opportunity is still open, and it is huge; I think many analysts are underestimating its size. But the only COVID-19 biotechnologies that will become incredible investments are those that get FDA approval of their vaccines.
I predict that the agency will shoot down multiple candidates, perhaps most of them. Why? Because the regulatory process may seem compromised due to speed. And many Americans already suspect vaccines, despite the wonderful health we enjoy from vaccines. Therefore, I do not believe that the FDA is lenient or tolerant of this emergency review process.
Many of the companies involved have been paid for their clinical trials with grant money. For example, Novavax has received nearly $ 2 billion in grants to pay for the development of its vaccine. With the kind of money the federal government is throwing at this problem, it is clear that the government wants the best possible vaccine. And he wants the company with the best vaccine possible to have sufficient funds to deliver a billion vials by 2021.
In fact, it’s remarkable that all of these companies with COVID-19 vaccine candidates are talking about having a billion doses ready by next year. Moderna is preparing to make how many vaccine vials? A billion doses. What about Novavax? How many vials will you make? A billion doses. Even small Vaxart (NASDAQ: VXRT) He’s talking about a billion doses (or more). Perhaps this is normal imitation behavior among pharmaceutical companies. Or perhaps the people who pay for all this research have pointed out to the biotech industry that every company needs high manufacturing capacity.
Why are these companies all Do you need to produce a billion doses if the FDA is going to approve many different vaccines? I would suggest otherwise. The first tests have accelerated at an incredible rate. But the FDA will be difficult to review, perhaps more difficult than normal. Because for a vaccine to really work, a large number of people have to take it. And people have to have confidence in it.
Therefore, I would expect perhaps one or two vaccines to pass the FDA review. I also expect some high profile disappointment and gnashing of teeth.
