Vaccine race heats up as pandemic in Europe soars

The Covid-19 gamble calls the bulls to the stock markets

Ugur Sahin

While locked down by pandemic, some people are losing billions of euros every day, but others are sitting on real treasures. Covid-19 is bad news for most but a superb chance for a few. The race to deliver a working vaccine lined all major pharmaceutical players. Besides racing with the pandemic, companies need to race with the speed of the disease's spread.

The large number of infected means a victory for the disease, but it also means a difficult time for testing of new vaccines. The first successful vaccine will start limiting the spread and speed of the disease. That would mean every next attempted drug will have difficulties finding fresh Covid-19 clusters to start testing. The stake for the winners is very lucrative as the purchase of the vaccines will be done using public funds in the EU, US, etc. We are talking tens of billions of euros every year, as the vaccines are most likely to be administered by seasonal shots.

All administrations are eager to start the real fight with the pandemic. The mayor of Germany's capital Berlin has already earmarked six key locations in the city where free vaccination will start. The target is to begin by early December.

In the UK, older care home residents and care home staff are top of the preliminary priority list. They are followed by health workers such as hospital staff and those over 80. People are then ranked by age, with people under 50 at the bottom of the list.

The first jabs may take place before Christmas if everything goes smoothly. The vaccine will be delivered through care homes, GPs and pharmacists as well as “go-to” vaccination centres set up in venues such as sports halls. However, there are logistical challenges to overcome - such as the need to keep the vaccine at -80°C during transportation from the manufacturing lab to vaccination venues.

Pfizer Inc announced that its Covid-19 vaccine candidate, developed with German partner BioNTech, showed in trials it had a 90% success rate in preventing infection.

“The market is becoming numb to it to a certain extent because we're getting vaccine headlines every other day,” Dennis Dick, a trader at Bright Trading LLC, told Reuters.

The youngest volunteers so far to get experimental coronavirus vaccines have been given their first doses and are now being watched carefully to see if they are experiencing any unusual side effects.

A team at Cincinnati Children's Hospital vaccinated 100 children as young as 12 last week, said Dr Robert Frenck, who is leading the trial for Pfizer's Covid-19 vaccine at the hospital. “Now we are pausing to watch for reactions to the vaccine. We right now are in a planned pause to make sure that everything is as safe as it can be,” Frenck told CNN.

The world is waiting for a Covid-19 vaccine or more evidence that other treatments can be effective against the coronavirus. But recent setbacks in trials have made investors nervous.

That's why some drug stock experts say people shouldn't be betting on vaccine winners and losers.

Pharmaceutical giant Johnson & Johnson recently announced it had to pause trials for its vaccine after a volunteer got sick. British multinational drug company AstraZeneca was forced to halt its trials last month as well and there are lingering questions from regulators.

And just this week, Eli Lilly, the maker of an antibody cocktail touted by President Trump after he was diagnosed with and treated for coronavirus, said it was pausing a clinical trial, too.

Shares of Eli Lilly and Regeneron, which makes another treatment that Trump received while he was hospitalised at Walter Reed, had surged following the President's endorsement.

Drugmakers and biotechs are understandably working feverishly to try to come up with a vaccine or treatment of Covid-19. Pfizer, BioNTech, GlaxoSmithKline, Novavax and Moderna are some of the other leading companies working on a vaccine. All of them have received funding from the US and some from the EU.

But investors probably shouldn't rush into these stocks on hopes that one of them will be the first to come up with a successful vaccine. Vaccines may not be all that profitable for Big Pharma and biotechs, and a vaccine is unlikely to move the financial needle, so to speak.

“Larger companies like Pfizer and J&J are not looking to make a ton of money from a vaccine,” said Kyle Dennis, founder of the Biotech Trader at the RagingBull trading site.

Dennis noted that most of the vaccine makers will wind up having government-negotiated contracts. So a vaccine is probably not going to be a big revenue or profit generator. Investors should also be wary of the Covid-19 vaccine and treatment stocks simply because many of them have already surged on hope and hype.

Regeneron is up more than 60% this year. Moderna and another small biotech named Inovio are each up about 300% in 2020.

And Novavax has skyrocketed a whopping 2,840% - from about $4 at the start of 2020 to a current price of $117.

“I'm sceptical of the so-called Covid plays. I'd personally avoid all of them. They're all overvalued. Even the companies that succeed could be overvalued,” said Brad Loncar, a biotech investing expert. “There are a lot of people who aren't traditional biotech investors that are throwing money at headlines but not doing the homework to figure out the math of what any financial gains will be,” Loncar added.

“We have to have a vaccine. It's our ticket out of this. We're not going to fill football stadiums with 80,000 people until there is a vaccine,” Loncar said. Investors need to focus more on other diseases, too, Loncar said.

Big money expectations lead to several fake news releases aimed to pump up certain shares.

California biotech company Vaxart, which is working on a Covid-19 vaccine, is under federal investigation and is being sued by a number of investors for allegedly exaggerating its involvement in the US government's Operation Warp Speed programme for developing Covid-19 vaccines and treatments.

In June, Vaxart issued a press release that said “Vaxart's Covid-19 Vaccine Selected for the US Government's Operation Warp Speed”. The news helped propel Vaxart's stock price to nearly $17, up from approximately $3, and hedge fund Armistice Capital, which partly controlled Vaxart, sold shares for a profit of more than $200m, according to its SEC filings.

A few weeks before the announcement, Vaxart granted amendments to the warrants agreements, which allowed Armistice to sell almost all of their stock, which they did once the stock price skyrocketed.

In July, the US Department of Health and Human Services told the New York Times that it had not entered into a funding agreement or negotiations with Vaxart.

A final analysis of the Phase 3 trial of Pfizer's coronavirus vaccine shows it was 95% effective in preventing infections, even in older adults, and caused no serious safety concerns, the company said Wednesday.

The company counted 170 cases of coronavirus infection among volunteers who took part in the trial. It said 162 infections were in people who got placebo, or plain saline shots, while eight cases were in participants who got the actual vaccine. That works out to an efficacy of 95%, Pfizer said. The company said in a press statement it expected a clearance for both the US and EU within days. The initial provisionally ordered volumes exceed 1.3 billion doses in 2021.

Both Moderna's and Pfizer's vaccines use a new and relatively untested vaccine technology that employs genetic material called messenger RNA or mRNA. The mRNA encodes for a piece of the coronavirus's spike protein- the structure it uses to attach to cells it attacks.

When injected into people, it causes some cells to produce little pieces of this spike protein, which the immune system recognises and develops antibodies and immune cells to attack. So when a vaccinated person is exposed to the real virus, the immune system is already primed to neutralise it quickly.

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