The number of deals the U.S. government has entered with vaccine makers in response to the pandemic keeps growing.
The latest agreement is between the U.S. and two pharmaceutical giants Sanofi (NASDAQ:SNY) and GlaxoSmithKline (NYSE:GSK). Under the $2.1 billion deal, the largest so far, Sanofi and GSK are obliged to develop and potentially deliver 100 million vaccine doses.
Last week, it was Pfizer’s (NYSE:PFE) turn for a similar number of doses–but at a lower amount of $1.95 billion.
Several other biopharmaceutical companies are on the hunt for a vaccine. Then there are the oddball companies getting in on the action, in one way or the other.
The world’s No. 2 cigarette firm British American Tobacco (NYSE: BTI) is, for instance, developing a vaccine for the virus using what it knows best–tobacco leaves.
Kodak (NYSE:KODK) will likely be involved in manufacturing ingredients for use in making the vaccines.
All this paints a picture of a crowded field. Has a large number of players destroyed what would have been a lucrative opportunity for biopharmaceutical firms? Not really.
Here is why you shouldn’t dump biotech stocks over fears of cutthroat competition.
Virtually every country in the world is suffering from the pandemic. Places where the pandemic had been contained, such as Vietnam and Hong Kong, are now experiencing a resurgence.
This means that the total addressable market is as large as the existing global population. You are looking at a potential market size of more than 7.5 billion people. The global community is a market that no one biotech firm can satisfy. The pie is big enough to go around.
There is a lot that is still unknown about the virus, but studies are already demonstrating that the immunity achieved after getting infected is temporary.
According to researchers at the University of California, Los Angeles, the antibodies produced after getting infected with the virus disappear within 12 months. In other words, hoping for herd immunity is foolish.
Additionally, the virus will be around for many years. The director of the Center for Infectious Disease Research & Policy at the University of Minnesota, Michael Osterholm, recently told CNBC that “we will be dealing with this forever.”
With the virus expected to be around for years, vaccinations will be periodical. This will create recurring revenue opportunities for successful biotech firms.
Compared to medicines that reduce the severity of the illness, vaccines have higher success rates. Still, around two-thirds of vaccine candidates never make it to the finish line.
According to biostatisticians at the Massachusetts Institute of Technology, infectious disease vaccines have an overall clinical success rate of 33.4%.
So far, the majority of the vaccines under development are in various trial stages, with mostly positive news coming out. That will change as they near the critical stage of approval for mass use. In just a few months, the competitive landscape may decline substantially as more companies lag.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the stocks mentioned.
Last modified: August 2, 2020 4:41 PM UTC