“Anything you can do, I can do better. I can do anything better than you.”
“No you can’t.” “Yes I can”.
“No you can’t.” “Yes, I can”.
“No you can’t.” Yes I can, YES I CAN!”
(From the musical “Annie Get your Gun”, composed by Irving Berlin)
The Covid-19 global pandemic is awful, was awful and will continue to be awful for a while. Even after global immunization, the pandemic will, in all likelihood, degrade to an endemic viral outbreak, inflicting human damage and emotional consternation wherever and whenever a mutation of concern emerges.
Most governments bungled badly; possibly based upon a lack of talent within legislative branches worldwide, forced to accede to the will of bureaucrats habituated to proffering their considerable clout for the benefit of others. The result was helicoptering of trillions of dollars of borrowed funds for short term economic stability, without the slightest regard for the inflationary consequences that would result. Tens of trillions were shoveled out the door, trillions were horribly misspent. Governments are no wiser for their follies and the populace is too weary of lockdowns to demand either accountability or an insistence upon proactive planning so as to ensure that in future pandemics, the response is deliberate, coordinated and rehearsed.
A virus that was, as likely as not, genetically modified in order to improve the gain of function; one that, as likely as not, escaped from a virology lab via sloppy handling of a deadly pathogen; one that, had it not escaped when it did, would have likely been made even more deadly in subsequent experiments; is it any wonder that national governments hid the details from the public, while privately freaking out? As bad as this was, what would have been the result if the virus had continued to be modified, only to ultimately escape its captors at a later date, in an even more deadly form? We are all lucky, given the range of possible scenarios that some think tanks are quietly laying out to national security agencies globally and bio-medical specialists, that it was not considerably worse.
“Are you insane?”
“Lucky?…..how dare you? Millions have died!”
Before readers start Googling “noose-making 101”; permit me with the luxury of a few moments to lay out my thought process. Upon the conclusion of my thesis, should you remain convinced of my hard-heartedness, then by all means, be sure to check out “the Complete Book of Knots”, available on Amazon, Goodreads or other fine sellers. Value types might find the selection of used copies offer appeal, some claim to have been read only once.
Some of the great discoveries of mankind were commercialized during periods of incredible peril.
Consider, by way of example, the development of the antibiotic, penicillin.
The antibacterial properties of penicillium mold were discovered in 1928, by Dr. Alexander Fleming but peers showed little interest. In fact, Professor Harold Raistrick, a biochemist and expert in fungal substances enlisted by Fleming to help purify the penicillin from the mold, declared ”the production of penicillin for therapeutic purposes…almost impossible.” Pharmaceutical companies were solicited in efforts to assist but were uniformly disinterested in the discovery. Objections from existing pharmaceutical producers were based upon self-interest; commercializing an entirely new product would require the development of expertise and the designing of entirely new factories, factories that ran the risk of obsolescence as systems evolved.
Fleming’s discovery languished for an additional 10 years until a small team of scientists was assembled to purify the substance into a workable product. It took an additional 3 years to come up with a rudimentary process to produce penicillin on a miniscule scale. In 1940, animal trials began, and in 1941, preliminary human trials commenced. The human trials endured setbacks, not because of an efficacy issue with the antibiotic itself, but rather due to the fact that the sufficient quantities could not be produced to complete a dosing regime for even a single person.
It took the onset of WW II to establish both the need for a mass production process of penicillin and the legitimization of the antibiotic as a first line treatment for bacterial infections.
A department of the US government provided access to their laboratory in Peoria, Illinois. That lab had expertise in fermentation and soon identified a strain of mold containing 600% more penicillin than the original strain. After the US entered World War II, 20 different labs of varying sizes in the US produced the antibiotic to support the war effort. It took approximately 3 years of continuous production from these labs to provide sufficient quantities to meet the demands of the US Armed Forces and their allies. It was only after the end of the war that the antibiotic entered general global markets for sale.
The total number of lives, cumulatively, saved by penicillin has never been fully tabulated since its commercialization, but has been estimated to be in the range of up to 200 million persons. An entire antibiotic industry, with a myriad of miraculous compounds, sprang entirely from commercialization of a product that was initially sneered at, reduced to a “theoretical” due to an unwillingness to develop a means of production and rejected by competitors for fear that the capital investment required would be money poorly spent. It took a global conflict to demonstrate the need for such a product, resolve issues surrounding mass production and establish a supply chain capable of rolling out the antibiotic to allies of the United States. Pfizer, a non-descript manufacturer of vitamin C, became the largest producer of penicillin and went public in 1942.
Jump ahead to the present; a menacing virus, one that seemed almost a hybrid of two or more existing viruses, possessing a unique chain of 4 amino acids, one not found in nature, whose sole purpose is to create a positive charge and facilitate the binding of the virus to a human cell sweeps the planet. Existing pharmaceutical producers, tasked with offering an acceptable vaccine to combat this unusual virus, roll out the standard fare, essentially variations on existing vaccines and reliant upon a vaccine development approach initiated hundreds of years ago by Dr. Edward Jenner. In 1796 Dr. Jenner collected pustules from cows infected with cowpox (a mild-mannered bovine cousin of the smallpox family) and injected a child with some pustules. This approach, named an “attenuated” virus vaccination, is still employed on a mass scale today. Subsequent innovations in the vaccine world have largely centered on the attenuation platform, using a live virus, a dead virus, etc.
The body of scientific knowledge has evolved considerably since 1796, hasn’t it?.
We no longer rely upon oxen to plow fields. The neurotoxin, Mercury, no longer represents our first line treatment for venereal disease. We no longer cook food or distill alcohol in solid lead pots. Yet, conventional vaccine technology, despite vociferous protestations to the contrary by most employed in the pharmaceutical community, has utterly failed to keep pace with the times. To the layperson, it almost appears, based upon the relative lack of innovation as compared to other sectors of medicine and science, that vaccine producers closed the books on the scientific method in 1796 and declared ” we’re done here”.
Think of mRNA as a software patch, while DNA represents the operating system itself.
It is well understood that many of the issues regarding vaccines rely upon how they are formulated; they represent an extremely blunt instrument, sending a multiplicity of instructions, many at odds with the needs of the body, when often nothing more than a delicate tool is required. Enter the concept of messenger RNA vaccines. Messenger RNA (mRNA) is aptly named, it delivers the information encoded in one or more genes from the DNA to the ribosome, a specialized structure, or organelle, where that information is decoded into a protein.
If you need to instruct the human immune system to perform an unconventional function, do you purchase an entirely new operating system, each and every time that a new instruction is to be relayed? You could, but that would be highly inefficient. Instead, it would be considerably more efficient, in most cases, to simply update the software. That is what happens in the technology world. Whenever a computer virus is identified in the world of tech, a software update (patch) is developed, generally within just a day or so after identification of the virus. The patch is downloaded, where it quietly does its thing without the user being forced to ditch a complete operating system and start from scratch. As a conceptual framework, the use of mRNA to patch DNA software offers a myriad of advantages over the approach used for hundreds of years. In the tech world, patches are faster than building an entirely new operating system which means that there is no downtime for the OS. A patch can be adapted to almost any scenario and to fend off almost any attack on the OS itself. Well designed patches can extend the useful life of even the oldest operating system. The directness and simplicity of mRNA instructions represents its elegance.
As with penicillin, when first discovered, mRNA was looked at by the mainstream pharmaceutical sector as little more than a side-show; an interesting concept to be sure, yet neither practical nor doable on a commercial scale. Entirely new factories would be required to be constructed, entirely new supply chains would be needed, completely new expertise would have to be developed. To most large and well established pharmaceutical companies, development of mRNA vaccines would be expensive and threatened the orthodoxy. Existing plants could be declared redundant, retooling would be costly, knowledge skill-sets (intellectual property) would run the risk of total obsolescence.
In short, inasmuch as mRNA biotechnology development represented a potential benefit for the world at large, it also posed a serious threat for certain vested interests. When facing a peril, one response is often to do nothing and hope that the danger disappears on its own. For close to 30 years, mRNA vaccine development has been, as a consequence, painfully slow, based upon a lack of funding to commercialize the technology. Certain potential benefits of mRNA technology as a delivery system have been incorrectly ascribed as being detrimental. For example, “mRNA can penetrate the blood-brain barrier” has been put forth as an objection. Repetition of this statement has created a public acceptance of that point without thinking of the clear benefit that flows through. Messenger RNA CAN penetrate the blood-brain barrier; such capabilities may, sooner rather than later, result in treatments and vaccines for the wide variety of brain disorders, brain cancers, etc. presently considered untreatable.
A global pandemic, a global terror and a lack of useful solutions within the pharmaceutical orthodoxy laid bare the issue of a planet wholly dependent upon antiquarian vaccine technology.
Messenger RNA companies, for more than a decade, were solutions seeking a problem. Their time had arrived and the proof of concept lay right on the table; what was required was final funding, a sense of urgency and the application of moral suasion to help build out the necessary supply chain. The US government proved invaluable as did the government of Germany, to push the vaccines forward to the finish line. Messenger RNA vaccines stopped being a concept; they are a real thing. Commercialization of a hitherto “concept” in the biotech field was initiated. As with the WW-II rollout of penicillin, allies of the MRNA producers received the vaccines first until the supply chain permits global rollout. Differing from the WW-II rollout of penicillin, where over 20 US companies competed, sometimes against one another, for market share, the present mRNA vaccine industry represents monopolistic competition from the outset.
“Other than Covid-19, what can mRNA vaccines do”?
The better question is “what can’t they do”? Messenger RNA is a 21st century approach; conventional vaccination technology remains rooted in the 18th century.
‘What other vaccines can mRMA technology make better?”
Theoretically, EVERY existing viral vaccine on the planet is now under threat of being made redundant, once an mRNA application is provided. And, there are new frontiers. Consider the oft-derided objection, the ability of mRNA to breach the blood-brain barrier. What is the potential global demand for a vaccine that quickly sends out instructions to fight a brain-cancer, to instruct the body to stop producing beta amyloid plaque that might be a root cause of Alzheimer’s?
Is mRNA vaccine technology potentially “a big thing”?
I suspect that it is. My assumption is that we are not so much talking about an incremental improvement in the delivery of vaccines. I don’t even categorize this as a likely evolutionary step. Rather, the replacement of conventional vaccine development, completely entrenched and dug in around a three century old premise, may represent a legitimate revolutionary advance. Should that prove out, potential exists to sweep aside many conventional pharmaceutical products and some producers. The present composition of the mRNA sector is highly monopolistic. More or less, I believe that we are talking about Google and Microsoft, at a relatively early stage, when considering BioNtech and Moderna. Everybody in the investment community seems to be focused upon one, or the other, as though this represents a winner take all scenario; but what will the world look like, two decades hence, should BOTH succeed?
Are we evaluating the prospects for messenger RNA vaccine producers with the wrong perspective?
Google (now Alphabet) and Microsoft have a current capitalization of $3.5 trillion US and are forecast to earn possibly $110 billion in the coming year. BNTX and MRNA have a current market capitalization of about $130 billion and are forecast to earn as much as $20 billion in the coming year. Google and Microsoft are classified as technology firms. BioNtech and Moderna are classified as biotech firms. Consider a unique perspective on the sector; are BioNtech and Moderna less pharmaceutical firms, more technology firms?. Under that light, both BNTX and MRNA are offering more or less, service updates to a propriety biological operating system. Each person being vaccinated using either mRNA product, objectively, represents nothing more than the initial, clean, installation of the platform. The customer base presently supplied is either first world or the upper income brackets in developing and secondary markets. That represents a technology pundits dream come true. Messenger RNA companies are disruptors and disruptors can, when successful, capture not only their full market share, but represent the absolute ruination of older platforms.
The only significant business development issue now facing both companies is persuading governments to pay for either the annual, semi-annual or bi-annual operating system updates, the “after-care packages”. I suspect that will be an extremely easy sell. End-users worldwide are overwhelmingly expressing a preference for mRNA based vaccines over other formulations. Attenuated virus vaccines sit on shelves gathering dust even as the death toll mounts. Brand awareness is taking hold, momentum favoring mRNA is growing.
Once the install basis is firmed up, then cross selling of new services can commence, to a massive and largely captive customer base. Viewed through that lens, what does the future hold for this monopoly once investors obtain confirmation that this is not a one-off? Covid-19 commercialized the mRNA vaccine model. A second, non Covid-19 vaccine, likely to target influenza, may fully legitimize the business thesis. A third vaccine, possibly a shingles competitor to the formulations on the market, will confirm the secular shift, away from attenuated products; cementing the potential dominance of mRNA.
Does a biological technology monopoly, one featuring a massive install base comprising potentially several billion users by the end of 2021, does that monopoly justify a market capitalization of just $130 billion?
Every time the medical community says the word “booster”, I hear the term “software license renewal”. It took over a decade of marketing for MSFT and GOOG to build out their base beyond a billion installs. BNTX and MRNA, in stark contrast, based upon orders, appear highly likely to build out an install base in the billions, in less than one calendar year. GOOG & MSFT have a market capitalization roughly 27X that of the mRNA duopoly and only are forecast to generate 5.5X-6X the net profit of the mRNA pair. Given the incredible market penetration, for what is truly a brand new biological technology, one with extremely limited competition; is such a valuation discrepancy justified? The assumption by the street, regarding pharmaceutical vaccine producers is that pricing will come down over time. If one views the business proposition as more technology related, then the modus operandi of tech giants are to price the product aggressively, at the outset, in order to capture the market, and then RAISE prices steadily over time, while offering complementary suites of value-added services. Imagine 2-3 billion persons on the planet, each generating $25-50 per install annually for the monopoly, before value added sales of new products are incrementally added to the platforms. Now that profitability has been established for the monopoly duo, capital exists to speed up service delivery; “updates” should be faster, more reliable and prove capable of handling even more tasks, as years progress. The business model has the potential to become a sort of biological monopolistic utility.
Years from now, we may look back at the sorry debacle that was the Coviod-19 global pandemic and offer a qualifier that softens the blow.
“Remember Covid-19? It killed millions of people”
“That’s true, but the adoption of mRNA vaccines led to a whole bunch of new vaccines for dozens of previously untreatable, deadly ailments. The world is now better, healthier and living far more productive lives due to the new pharmaceutical technology.”
Would not THAT be a fine thing?
mRNA vaccine producers: “Anything you can do, I can do better.
I can do anything better than you”.
Mainstream Pharma: “No you can’t.”
mRNA: “Yes I can.”
Mainstream Pharma: “No you can’t.”
mRNA” “Yes I can.”
Mainstream Pharm: “No you can’t.”
mRNA: “yes I can, YES I CAN!”
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