The US government made another giant gamble on Wednesday on a promising candidate for the coronavirus vaccine from biotech giant Pfizer (PFE) and its partner BioNtech (BNTX) raising a collective of $ 1.95 billion for their efforts.
The new contract from the US Department of Health and Human Services and the Department of Defense requires companies to deliver 100 million doses if their candidate is successful enough to gain approval. The companies behind the candidate have already published promising results that have shown that effective immune responses are being developed by patients receiving the candidate under test.
That said, the next step, a late-stage trial involving 30,000 patients planned for later this month, becomes crucial enough to see if it can reach the efficacy threshold set by the U.S. Food and Drug Administration. , Which requires that more than half of patients show adequate immune responses to the virus. So far, investors have been building up on top biotech companies with each new wave of positive data. That has led to speculation about actual progress right now, according to Jefferies health care equity strategist Jared Holz.
“My view is that there has been a ridiculous amount of speculation about the success of these trials and the bets I think will be a bit more difficult with the success of the stock valuations to date,” he told Yahoo Finance.
Nicknamed “Operation Warp Speed,” the Trump administration announced plans in May for a total effort to produce and distribute a coronavirus vaccine by the end of 2020. (Photo by Drew Angerer / Getty Images)
So far this year, Pfizer’s shares are nearly flat, but its smallest partner, BioNtech, has seen shares rise by 170%. Novavax (NVAX), which also won its own $ 1.6 billion government contract to continue working on its own vaccine candidate earlier this year, has seen stocks advance a staggering 3.161% since the beginning of the year despite the fact that The Maryland company has never been successful in bringing a vaccine to the market.
“I think most of the stocks have gotten their fair credit or their fair share of credit for the successful development and marketing of vaccines,” said Holz. “So from now on, it will all come down to who has the best data, if investors are looking at this as a winner who takes the whole market, if it will be seen as multiple winners can participate.”
That question is important as top vaccine contenders at Pfizer and BioNtech, Novavax, Moderna (MRNA), and AstraZeneca (AZN), which received $ 1.2 billion in government funding for potentially 300 million doses of its candidate vaccine in which is working with the University of Oxford researchers, they run in late stage trials.
“When you look at the amount of vaccine support that has been provided to companies as we discussed earlier from a dollar point of view, and then you look at how many patients can be treated with that, we’ve already come up with a sum that equals the amount of the American population, “Holz calculates.” So I’m not sure what the advantage is. We’ve been saying for weeks that stocks are trading much more in the narrative than the actual valuation. “
With that said, Holz lives up to his call that at least one vaccine candidate will be effective and will ultimately gain approval to be distributed to the public by the November elections. Getting there first might justify some of the outsized moves in space thus far, but Holz believes that investors are completely underestimating the idea that the chosen vaccine might be noticeably less effective than previous trials suggest.
“They are all very risky. We really haven’t seen any real-life evidence that any of the vaccine programs work against the virus itself, ”he said. “We have no idea in a real-world Phase 3 setting with 30,000 patients in each trial, at least, how these vaccines will work.”
