From a business perspective, analysts looking at the high efficacy reports recently issued by Moderna and Pfizer, no doubt to be “surpassed” by other vaccine developers, will conclude that once a round of inoculations have taken place, covid-19 will largely cease to exist. Some investors look at the data and project that these vaccines will be sufficiently prophylactic that the problem largely disappears after one or two rounds of immunization. They estimate potential profitability on those SARS-COV2 vaccines and assume revenue to be, more or less, “one-offs”; an initial sales explosion followed in a year or so by a terminal revenue decline.
It the numbers put forth by Moderna and Pfizer are accurate, complete, and bear out in real world settings, it could make perfect sense to apply this revenue model to the manufacturer, or manufacturers, of a successful covid-19 vaccine. That is why, despite the potential for upwards of an 8 billion to 16 billion initial global dose demand for the combination of all successful vaccines, in the year, implying total vaccine revenue of possibly more than $100 billion, in just the first full year of assumed production, valuations for vaccine developers of late have stalled.
There seems to be two very straightforward and glaring issues with the reported efficacy rates. The first issue is extrapolation bias; assumptions of 95% disease prevention are likely wildly overstated. Present phase 3 trials underway aren’t challenge trials where vaccinated individuals are deliberately exposed or infected with Covid-19 thereafter, so as to truly determine the vaccines true benefits. No, those who are vaccinated go about their normal lives and therein lies the problem; normal lives in this pandemic are anything but normal. Once test subjects leave the labs, they put on their face-masks, get into a disinfected vehicle, drive home solo without any stops along the way and then proceed to live the monastic existence that most of us are required to; we are all required to maintain proper physical distancing, minimize possible exposures, maybe work remotely, speak in hushed tones, comply with state and local guidelines or edicts. Our children limit their interactions so they have a lower risk of infection; when they return from school, if they are fortunate enough to have physical teaching, they are less likely to be ill and potentially transmit to parents and elders. If our children DO contract Covid-19, they are most likely asymptomatic (getting the virus without exhibiting symptoms). We don’t visit relatives, we don’t go to restaurants, we don’t attend massive college football games, we don’t travel by crowded planes to remote holiday destinations as before or eat at buffet restaurants; as a species, our degree of human interaction has been diminished by such an extent that the tradition r-naught associated with airborne viral contagion is a mere fraction of what it would be in normal lives. Test subjects need exposure to the virus, and that lack of exposure is the missing link in the supplied data.
Secondly, asymptomatic transmission, which scientists are now coming around to more candidly discuss (indicating risks of transmission by asymptomatic carriers is likely EVERY bit as high as from symptomatic individuals) is unreported in the vaccination studies. Vaccine test subjects are NOT given regular tests for infection; most of the data is based upon self-reporting of symptoms leading to confirmation tests thereafter. So, for the vast majority of infections (estimates range from 3X-10X the number of asymptomatic cases vs tested and confirmed symptomatic cases) in the real world, where there may be masses of modern day “Typhoid Marys” infecting at will, those persons aren’t being reported in the regular state or national Covid-19 data; so why would they be caught up in data issued by vaccine developers?
The vaccine data IS good, for two of the three developers reporting phase 3 data, but good doesn’t mean complete. Salient details are being omitted and those glaring omissions will only be noted once mass vaccination occurs.
Assume that skeptics on valuation are absolutely correct on the notion of a terminal decline in vaccine revenues after a year or so. Despite the data omissions, of which they are undoubtedly aware, lets take their assertions at face value. After all, many of those who invest or speculate in pharma are as qualified, sometimes more qualified, in their medical expertise than the people running big pharma companies; the stakes are sufficiently high that at large equity players, such as Renaissance Capital, the best, the brightest, the most qualified are hired and make it their business to be in the know.
Now, let’s run a “what-if” scenario that few are, to this point, are likely considering.
“What if” a messenger RNA vaccine (mRNA), the first of its type, one that successfully immunizes against quite a nasty coronavirus, is simply the “first” of its CLASS? “What if” the developer of the successful Covid-19 vaccine is now quietly working on the less lethal, less transmittable, but also nasty influenza and rhinoviruses that circulate the planet annually? Just how much would the world pay to have an effective vaccine against the annual flu and colds? How much more productivity would the world enjoy, and how much less overall stress on the health care system would there be if the annual flu and cold season diminished by 70% or so in the first couple of years, and then finally dies off when several good years of inoculations hinder the mutability of the virus to the point where an updated vaccine finally kills off the virus completely?
Yes, there are ALREADY vaccines put forth every year for the flu. Have you ever done a deep dive on their efficacy? I have. Let’s clear the air; for the most part, annual influenza vaccines, based upon the current viral vector formulations, are dismal failures. Viral vector manufacturing of vaccines is designed for DNA viruses, they are, to put it bluntly, the wrong tool for RNA viruses, but until the 21st century, viral vector was pretty much the only tool available; so manufacturers produced what they could, with what they had. At their best, CDC data, compiled for more than 30 years, indicates about a 39% overall annual historic effectiveness and those numbers are fudged; in order to even report that failing grade, liberties are taken with the data that make the numbers seem more science fiction than science fact. Some years, the assumed benefit is less than 20% and that barely nudges effectiveness beyond incidence of statistical chance. Seniors are generally excluded from the databases because the benefit for seniors is so low that it skews down the overall impact; in fact, the most in-depth data compiled on senior benefits from traditional inoculation has determined that influenza vaccinations prevention does NOT exceed statistical chance, so a fast growing segment of the human population badly needs something that, for now doesn’t work one bit on their age group. The statistics put forth assessing the annual benefits of influenza vaccines are largely “guestimates” derived from assumptions. There is no contact tracing done with influenza patients to follow up thoroughly on R-naught; this implies that science doesn’t even have an accurate handle on whether or not influenza vaccines block infection or merely reduce symptoms, for most persons.
Everything that science didn’t know about SARS-Cov2 was due to the fact that science didn’t know much about influenza, or the host of other coronaviruses, or the multitude of rhinoviruses. For the better part of half a century, we’ve been guessing, typically incorrectly and throwing antiquated vaccines up against a steadily mutating influenza. Of great concern, for both investors and the public at large, lies in the point that the same viral vector formulations of vaccines that have, for close to 50 years, produced such dismal failures with influenza vaccines; this approach represents the same scientific starting point for Covid-19 vaccines now underway at many of the pharma giants in this fight. If insanity is defined as doing the same thing over and over again and anticipating a different result, why does anyone expect that employing a failed model, in current vaccine formulation, will magically produce a highly effective Covid-19 vaccine? To me at least, the answer seems self-obvious.
Astra-Zeneca, one of the big pharma firms working on the problem, already seems to be following the same tired path that we have experienced with inferior influenza vaccines. They announced a Covid-19 vaccine with good results, only to have third party scientists determine that the data is dodgy, some data was stripped in order to make the efficacy appear better and seniors were largely excluded from testing so as to maintain a good result. And, once again, possible asymptomatic carriers were excluded in the data; overall this means that a 70%-90% efficacy rate might only be as good, in real world settings, as those lousy flu vaccines produced based on viral vectors; a 39% real world success rate just won’t cut it with Covid-19. When pressed on on the lack of detail in clinical data reported thus far, or more precisely, just what data was actually removed to bump up efficacy to 90% when external scientists came up with numbers that looked closer to 62%, Astra tried a bit of marketing misdirection; “after all, its just $2.50 a dose”. In other words, it doesn’t work well, but its cheap. To actuaries, the value of any human life is far greater than $2.50 and it is far greater than $20, so if the difference between an ineffective vaccine and an effective one is just $17.50 per dose, Astra cannot even win on the value proposition.
I don’t hold up a lot of hope for a truly good result from any of the viral vector formulations now being tested; my skepticism is based upon the overall lack of success using viral vectors on coronaviruses in general. Roughly 2/3 of the vaccines now under development to immunize against Covid-19 are based upon the antiquarian pharmacology; why not throw some leeches into the mix if we’re that gullible? Thankfully, as this is the 21st century and not the early 20th century, there are a number of vaccine developers who opted for a 21st century approach, rather than the “produce failures, obscure the failures with a lot of paper, buy off politicians and spend a lot on TV ads to market those failures” model. It stands to reason that IF a successful SARS-CoV2 vaccine comes to fruition (and it seems that there might be several) based upon the mRNA model; what works with a tough virus might be equally successful on a less tough virus. As an equity investor, any vaccine producer specializing in new mRNA vaccines, with an existing revenue generating product capable of supporting the development and release of other vaccines, that would seem to be of interest to me for further investigation, to potentially add to my equity collection. FINALLY dealing with influenza and the common cold, that’s where the upside of ALL of this mess and disaster wrought upon the globe by SARS- Cov2 might lie. And beating the flu, the common cold and other RNA viruses with mRNA doesn’t just impact vaccine producers; when, if ever, have you heard of contact tracing for influenza outbreaks? Until now, technology was unavailable…..until now.
If I was to own a vaccine developer such as Moderna, or perhaps another promising developer; an mRNA vaccine for Covid-19 should represent the first, but not the only, coronavirus or rhinovirus vaccine that could be a revenue generator. Global regulatory agencies have come on board with development efforts such as the American ” Operation Warp Speed” initiative.
Science, until now, has been bashing its head against the wall trying to beat RNA viruses. It will prove to be highly ironic indeed, if mankind needed a highly transmittable and deadly (to the elderly) virus to be unleashed on the planet, one that nearly beggared the economies of the developed world, solely in order to come up with an effective vaccine for the flu; but, to quote Winston Churchill: “Never let a good crisis go to waste”.