Moderna has most to gain from regulatory approval of its Covid-19 mRNA vaccine, even if the vaccine itself has a low profit margin, says Jenna Denyes, senior healthcare analyst at GAM Investments.
When considering the companies that are developing emergency Covid-19 vaccine candidates, she said the size of the firm is important.
The vaccines being developed by Oxford University-AstraZeneca, Pfizer-BioNTech, Moderna, and Johnson & Johnson (J&J) are all in the lead, but not all companies involved stand to benefit equally.
“AstraZeneca and J&J, if they have a successful Covid-19 vaccine, that’s great,” Denyes said. “But if they don’t, they’ll still be fine.”
For smaller companies like Moderna and BioNTech, a vaccine approval would provide a commercial advantage that’s not directly tied to making a profit on the pandemic.
Year-to-date, the share prices of AstraZeneca, Pfizer and J&J are relatively unchanged, whilst Moderna is up by more than 600 per cent and BioNTech over 200 per cent.
Share price of Moderna year-to-date
Source: Google Finance
Deynes said if Moderna’s mRNA vaccine is approved, it’ll be a major event for the company.
“It’s going to be a huge boost for them to have some cash flow coming in, even if it doesn’t have a large profit margin,” she said.
This is due to the inevitable increased access to physicians, increased access to distribution channels, and relationships with payers, that comes with regulatory approval for a worldwide emergency vaccine.
“Last year, Moderna had close to something like 300 patients with mRNA and now they have thousands,” she added. “The scale that they’ve gone to seeing what their therapeutics doing in patients is huge.
“That is definitely going to read through to their other pipeline drugs. BioNtech, as well, they have a number of different types of modalities, not just mRNA.”
Moderna has yet to have a single product approved, but if the US and European emergency regulatory bodies do approve its mRNA vaccine, it could have implications for the rest of their pipeline products.
She said the pipeline validation is “a main driver” for any commercial benefits.
For the bigger companies like AstraZeneca, Pfizer and J&J, the Covid-19 vaccines are not a big profit-making endeavour.
“All of the companies involved in the pandemic response – from vaccine to diagnostics to therapeutics – have all been extremely vocal about not making it profit-making,” Denyes explained.
“They are companies, they need to stay viable and functional. But just about everything is going to be priced quite transparently at cost or within very marginal profit.
“They want things to be accessible to the largest number of patients possible as quickly as possible in a way that lets them continue to develop and produce them, but this isn’t going to be anything that is a commercial strength for any of these companies, and quite rightly so.
“There won’t be any huge profit margins off any of the infections or treatments,” she added. “No one wants to drive a Ferrari that was paid for by Corona patients.”
Denyes finds it unlikely that the larger healthcare companies will be funding any massive research and development programmes off the pandemic.
Additionally, investors expecting healthcare companies to develop future vaccines with the same pace as the Covid-19 vaccine may also be disappointed.
She said: “The billions of dollars being poured into this vaccine challenge is unfortunately one of the things that drove a lot of the speed, and we’re probably not going to see that happen on a regular basis.”
The companies were able to streamline a lot of development steps because they didn’t the same decision gates that they normally do, such as whether the process was financially viable.
“Pfizer and BioNTech actually took four drug candidates into their phase one [and] phase two drug trials,” she added. “Taking four candidates for one infectious agent is astronomically expensive compared to how they normally go.”
Whilst developing vaccines and therapeutics play a major role for the larger companies such as J&J and AstraZeneca, the coronavirus has had a notable impact on their other business divisions.
At the start of the year, due to the number of people stockpiling prescription medicines, that part of the business did better than expected, particularly in the first quarter.
Performance of MSCI World versus MSCI ACWI Health Care YTD
Source: FE Analytics
Another surprise was the level of demand for surgical implants. Elective medical procedures increased during the year, depending on the country and restriction levels.
“The theory was that people were working from home, so they could recover from home,” Denyes said. “In some cosmetic procedures, hips, knees, things that were still allowed to take place, actually saw an uptick in in some of those elected procedures.”
Whilst there may be some pent-up demand from the year, she believes it is unlikely that investors will see a large increase next year. But one area she does think there will probably be some medical and commercial consequences is within diagnostics.
She said: “Initial diagnosis for heart problems and autoimmune disorders and cancers has been delayed. I think there will be increases in diagnostic rates in the coming years.
“I also think there will be an increase in severe patients, and patients who’ve already progressed, we may see a different profile of those type of patients for the next few years.
“For some cancers, even a delay of a few months can be pretty substantial in terms of possible outcomes and treatment decisions.”
Denyes said the thing that drives healthcare development is medical need and innovation.
“This year is actually on record is on track to be on record for a number of approved new medications by the FDA, and this figure is before any Covid-19 related approvals,” she concluded.
“I think this year has highlighted the fact that medical need is a reality for large swaths of the population, and that it can change in an eye blink.”