Some are true believers in the power of sophisticated mRNA vaccines, some go for exotic viral vectors, and some are linked to the time-tested cocktail of attenuated viral particles. Whichever approach you prefer, it is clear that there is probably more than one way to make a coronavirus vaccine.
Currently, there is no guarantee that one particular vaccine modality works better than another, nor are there indications that one is more profitable than the rest. Each vaccine technology carries a different set of risks and benefits, not to mention the profound implications for manufacturing cost, and investors need to know how to plan their portfolios properly.
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Vaccine technologies are not equally risky
Some of the currently popular vaccine modalities have never been implemented in humans in the context of prophylaxis, for example, mRNA-based vaccines in development by Modern Therapeutics, (NASDAQ: MRNA) Pfizer, (NYSE: PFE)and Translate biography, (NASDAQ: TBIO) among others. This means that there will likely be more regulatory scrutiny regarding a candidate’s effectiveness, as well as its side effects, and it may also be more difficult to combine the candidate with other technologies (such as delivery systems or adjuvants) to increase their effectiveness.
Also, since no one yet makes large-scale mRNA vaccines, increasing production capacity may be more difficult than with older technologies. That said, the public may be willing to pay higher prices for a vaccine produced with a novel modality, which would help offset the substantial development costs of the platform.
Here is a list of various vaccine contenders and the approaches used by each.
Data compiled by the author.
Other approaches, such as Sanofi‘s (NASDAQ: SNY) Viral protein vaccine has a long history of successful immunization for diseases like hepatitis B. As an added benefit, these approaches may also be less expensive to manufacture thanks to long-standing protocols that have already been refined for efficiency at scale.
Finally, the use of established technologies provides more opportunities for manufacturers to combine their vaccines with adjuvants, increasing the immune system’s response to inoculation, thus reducing the number of doses required to produce immunity.
Cover your vaccine bets
The market may react abruptly and widely and unpredictably after receiving the results of clinical trials, especially with regard to companies seeking untested modalities. Reports of worse-than-expected efficacy or serious side effects may raise the question of whether a company’s approach is viable at all, causing indirect losses for its peers, even if its candidate did not experience any of the same failures.
Conversely, favorable trial results may provide cascading critical scientific credibility for other companies taking the same route. Sometimes this can even offset the share prices of direct competitors. These effects appear to be in play for a handful of different vaccine developers like Moderna and BioNTech, but it is unclear whether this is a temporary phenomenon or something more lasting.
Here’s a look at the sometimes wild ups and downs of Moderna and BioNTech from May.
YCharts SPY data
The way to address this variability is to calibrate your choice of coronavirus stocks according to different vaccine paradigms and your risk tolerance. If you want a longer-term portfolio that’s more secure and separate from the hype cycle, go for a mix of companies chasing time-tested approaches like AstraZeneca or Sanofi, and then include just a few of the most promising innovators, like Vaxart, based on the consistency of its positive clinical trial results and moves towards commercialization. That said, this strategy is unlikely to make anyone a millionaire.
If you are a short-term growth-oriented biotech investor and are willing to take a big risk, it can be beneficial to build a portfolio that is heavy for companies using the same unproven approach, so you will benefit from a company Crusade growth based on the scientific credibility of the modality. Said portfolio would be loaded into Moderna, BioNTech and Translate Bio, but it would avoid somewhat safer bets such as GlaxoSmithKline or Johnson & Johnson.
Alternatively, selecting a handful of different untested approaches could minimize the chances of negative headlines building up their stocks, while maintaining the potential for aggressive expansion in the short and long term. Given the selection of companies described in the table above, it would mean investing in Vaxart, Moderna, Novavax and VBI Vaccines or Inovio. This is the strategy I plan to use, as I am comfortable holding on to stocks that do not win the coronavirus vaccine race if their platforms show promise in other applications.
