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Don’t Dump Biotech Stocks; Vaccine Race Is Not as Crowded as You Think

Last Updated September 23, 2020 2:10 PM
Mark Emem
Last Updated September 23, 2020 2:10 PM
  • Nearly every noteworthy biotech firm is developing a vaccine in response to the pandemic.
  • The U.S. government has entered deals with some biopharmaceutical firms to secure vaccines upon approval.
  • On average, about two-thirds of vaccine candidates fail.

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.

The U.S. government has entered into several agreements with biopharmaceutical companies to secure a vaccine. | Source: @npratc/Twitter 

The U.S. has entered similar deals with other biopharmaceutical firms, including Moderna (NASDAQ:MRNA), AstraZeneca (NYSE:AZN), Johnson & Johnson (NYSE:JNJ) , and Novavax (NASDAQ:NVAX).

Everyone’s Trying Their Hand at Making Vaccines

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.

Even cigarette manufacturer BAT is developing a vaccine. | Source: @ReutersUK/Twitter 

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.

1. The Total Addressable Market for Biotech Firms Is Huge

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.

2. No Durable Immunity

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.”

Experts are warning that the virus is here to stay, and vaccinations could become a regular exercise. | @LizSzabo/Twitter 

With the virus expected to be around for years, vaccinations will be periodical. This will create recurring revenue opportunities for successful biotech firms.

3. Not All Vaccines Will Work

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%. 

Only about a third of vaccine candidates get final approval. | Courtesy: American Council on Science and Health 

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.