Pfizer Inc. (PFE-$50.75, NYSE): Initial Analyst Modeling Suggests First Year Paxlovid Sales May Surpass $20 Billion US. Omicron Might Render that to Be a Conservative Estimate.

The head of drugmaker Moderna said that existing COVID-19 vaccines, in all likeliness, will prove to be less effective against the new Omicron variant causing worldwide concern.

There is no world, I think, where [the effectiveness] is the same level… we had with Delta,”

SVB Leerink analyst Dr. Geoffrey Porges suggests that total net sales of Paxlovid (Covid-19 treatment) and Comirnaty (Covid-19 vaccine) have the potential to surpass $50 billion US in 2022. If correct, this could propel total Pfizer 2022 revenues to beyond $100 billion US.

SVB Leerink represents the first significant investment firm to have provided an indication of the potential sales for Paxlovid. This is largely due to the fact that the pill is not yet approved by the FDA.

The emergence of the South African Covid-19 variant of concern, named B.1.1.529, should be of particular interest to those invested in the vaccine/treatment space. This virus is, as yet, not front and center in the public eye, but most assuredly deserves to be so. Travel to/from South Africa will logically need to be banned to limit the spread. B.1.1.529 has the potential to represent a further unwelcome challenge for the global travel industry.

Menacingly named “Omicron”, which, although just a letter in the Greek alphabet, nevertheless, evokes imagery of some sort of sci-fi movie virus released in Raccoon City (Resident Evil), or a Hydra base in the Marvel comic multiverse, B.1.1529 appears to have evolved in such a fashion as to better bypass the capabilities of present messenger RNA vaccines; there are now questions as to whether current antibodies generated through vaccination of present-gen vaccines will be adequate to combat the new strain.

A completely new vaccine update by the existing messenger RNA vaccine duopoly (Pfizer/BioNtech and Moderna) to combat B.1.1.529 might be needed. A key bottleneck for messenger RNA vaccine producers is not an inability to produce a new vaccine, but rather, an inability of current government health agencies to approve a new vaccine in swift fashion. Pfizer indicates that a start-to-finish reformulation of a B.1.1.529 variant specific vaccine could be done in as few as 100 days, but that does not reflect the timelines presently required for regulatory approval.

Therefore, the need for a first line treatment, capable of assisting the number of persons that will logically contract a “breakthrough” infection from B.1.1.529, will be more important than ever.

All other conventionally produced vaccines will almost certainly require reformulation in such a case; due to the normal delays in creating vaccines conventionally, they will be a full 3-6 months further behind the curve.

More importantly, for Pfizer, the emergence of a particularly nasty new Covid-19 variant might serve to accelerate global orders for Paxlovid. Variants of concern are of virtually no consequence to Paxlovid, as the enzyme blocker will still “starve” the virus out of the body.

Should B.1.1.529 circulate the globe, Pfizer sales of Paxlovid might be such that the SVB Leerink analyst, as far-fetched as a $20+ billion initial forecast for 2022 may ultimately prove to be conservative. In the coming months, I predict that the global buzz will increasingly refer to Paxlovid, should it be approved, as a potential first line treatment for the bulk of those diagnosed with a more serious Covid-19 infection. Hospital front line staff will experience a higher percentage of breakthrough cases than the public due to their prolonged exposure to infected patients; they will need an effective post infection treatment to recover more quickly and return to work.

A question that has been posed by some in the medical community is “why do such nasty variants of concern continue to emerge from South Africa?‘ The answer may lie in the uniqueness of the virus itself; Covid-19 seems to share a few structural commonalities of the HIV virus. A disproportionate percentage (19% of all adults aged 18-49), relative to other nations, of the population of South Africa is infected with HIV; the indications that the mutation was initially identified in younger persons and is spreading faster in the younger population should be unsurprising to researchers.

To the Covid-19 virus, HIV infected hosts seem to represent a human petri dish that may represent a natural incubator; such infected persons may offer the potential to accelerate mutability of Covid-19. I don’t expect the mass media will have even the slightest interest in pulling on this thread. However, the highly unusual step taken by the scientific community in assigning the name Omicron, rather than the simple suffixes such as Gamma, Delta, Alpha or Beta is suggestive of far greater differentiation in this virus than for previous variants.

Assigning a different name, out of sequence with prior Greek lettering, suggests that the new virus is sufficiently different from the former series of Covid-19, that it might not entirely represent the same virus. Think of coronavirus as a family of viruses: Covid-19 represents one species within that family; Omicron could be sufficiently distinct that it represents a separate species within that family. Again, not a perfect analogy; it is meant to illustrate. Some scientists have broken ranks and are calling B.1.1.529 a “distant cousin” of Covid-19. Maybe that’s not clear enough to sink in, so let us get a bit more direct, instead of referring to Omicron as Covid-19, maybe it should be called Covid-21.

There is no indication, at this time, that B.1.1.529 is more deadly than the existing Covid-19 variants. The few scientists that seem willing to go on the record do feel quite confident in their suggestion that it is far, far, more transmissible. Increased transmissibility may suggest that the viral load is stronger and therefore, should have negative implications for those in the higher risk groups. So, although the jury is out as to whether Omicron is more deadly than other variants, any statistician will readily determine that more of the higher risk groups will likely die upon infection, lacking effective antivirals.

I feel that this potential new subspecies of coronavirus, Omicron, deserves to be modeled quite seriously. The public is jaded, governments broke, business frustrated beyond comprehension on the thought of more lockdowns; nevertheless, scientists, with a simple name, have provided a glimpse into what further steps might be forthcoming and what industries might be impacted. Persons familiar with the Greek lettering system for viral infection naming might pass off this new name as being innocuous; after a certain number of prior variants exist, Omicron would inevitably be selected. However, B.1.1.529 bypassed the suffixes NU and XI in the naming sequence.

Omicron is more than a Greek letter; in astronomy, it designates an irregular placement that diverges from prior ordinals, in both position and magnitude. South African B.1.1.529 strain infection rates went from virtually nil, in testing, to more than a 70% overall prevalence rate vs other variants, in a space of three weeks. Such exponential growth is a magnitude not yet experienced to date. In areas of outbreak, Omicron is now the dominant strain. Most scientists, like economists, prefer the sobriety of irony over the delight of whimsy. The new moniker for B.1.1.529 seems apt, Omicron is not regular and may be consequential.

A global B.1.1.529 outbreak is NOT good news going into a December global travel period. If Covid-19 had been initially be affixed with the sinister name Omicron at the outset, the public would have likely taken the virus far more seriously, far earlier, and would have demanded that governments do the same. I think that we have, just today, all been warned.,vaccines%20and%20immunity%20gained%20from%20being%20infected%20before.

In order to come out of this very, very bad news ahead of the game, I suspect that a long-only investor will need to have a portfolio that is seriously overweight in vaccine stocks so as to offset the potential for some, potentially, quite serious capital losses on other sectors, in the near term. There will not be many portfolios globally with such a composition.

Doctor: “Your test results are in, and I have good news and bad news. The good news is that you tested negatively for Covid-19″.
Patient: “That’s a relief. What’s the bad news?”
Doctor: “I’m afraid you have Omicron“.

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