Corona vaccines: Emergency shot for the health sector
Corona has had a tight grip on the world for more than a year. One of the losers is the health sector as fewer operations were performed and less drugs were prescribed during the lockdown. The Corona vaccines are now the home-grown salvation for the health sector.
By Maximilian-Benedikt Köhn, Fund Manager of DJE - Europa and Healthcare Sector Analyst at DJE Kapital AG
mRNA - molecule with potential
Numerous pharmaceutical and biotech companies developed, tested, conducted clinical trials and launched Corona vaccines in record time. Among the numerous Corona vaccine projects, the gene-based mRNA vaccines are ahead of the game because they offer a high protective effect and can be produced faster than classical vaccines. The mRNA technology is rightly classified as an innovation, but it is by no means a completely new approach in drug development. Already since the end of the 1990s mRNA molecules have been the focus of biotechnological research, initially mainly in the field of cancer research. With the worldwide Covid 19 pandemic this technology achieved its final breakthrough. Companies such as CureVac*, BioNTech and Moderna have now a combined market capitalization in height of more than $135 billion. The vaccines from AstraZeneca and Johnson & Johnson (J&J) are so-called vector vaccines, they need a killed virus to transfer information about the Corona virus into the body.
A single dose of Johnson & Johnson's vector vaccine already provides around 65 per cent protection and AstraZeneca even up to 80 per cent protection against Sars-CoV-2 infection after the second vaccination. The mRNA vaccines from BioNTech/Pfizer and Moderna are currently well ahead of the field with around 95 per cent efficacy. The high efficacy of the vaccines is particularly important for the rapid achievement of herd immunity, so it is not surprising that mRNA vaccines are mainly administered in the USA. AstraZeneca does not yet have approval there.
The vector vaccine from J&J has the advantage that it only has to be injected once. But the other vaccines also show a certain protection after the first dose. AstraZeneca achieves an efficacy of more than 70 per cent in the period from the 22nd to the 72nd day after the first vaccination dose. For mRNA vaccines, the efficacy is 50 per cent 7 days after the first vaccine dose and 90 per cent after 14 days. Accordingly, mRNA vaccines are not only significantly more effective than vector vaccines, but also show a significantly higher efficacy after a shorter time.
BioNTech: Prospect of Corona vaccine 2.0
The disadvantage of mRNA vaccines compared to other vaccines that can be kept in the refrigerator is their temperature sensitivity. So far, they have to be stored and transported frozen at a minimum of -70°C (or frozen at -15 to -25°C). While it is possible to set up this technical and logistical infrastructure in industrialized countries, this is likely to pose major problems for poorer countries. BioNTech is already working on a solution to the problem and may be able to produce the Covid 19 vaccine in powder form by the end of the year.
Checkmate the mutants
Not only the vaccines, but also the Covid-19 virus continues to evolve and tries to survive through mutations. In Germany, for example, the British SARS-CoV-2 mutation B.1.1.7 is now the most common mutation, with over 90 per cent. Currently, vaccine protection against this more infectious mutation, which is probably also associated with more serious courses of disease, is available, but new, more aggressive variants could significantly reduce vaccine efficacy. Therefore, it must be possible to adapt the vaccines quickly to a changing viral situation.
Rapid adaptation to viral mutations is hardly possible with the classic, relatively static vector vaccines. This is where the mRNA vaccines score again: they can be adapted to different mutations within about six weeks and administered without further comprehensive phase III studies. Those already vaccinated earlier could receive a third so-called booster or booster vaccination with the new mRNA vaccine for both a higher protective effect and protection against mutations. And: In all likelihood, people previously immunised with a vector vaccine could also benefit from this mRNA booster vaccination.
Massive expansion of production capacities expected
In order to stop the Covid 19 pandemic herd immunity is imperative. From an epidemiological point of view, it is questionable whether the 75 percent announced so far are sufficient. The more aggressive the possible mutants, the higher the quota of vaccinated persons must be to prevent their spread. Consequently, the capacities of the vaccine producers are decisive. These should also be seen in relation to the market capitalization of the individual companies.
Both J&J and Moderna plan to deliver over 1 billion doses of vaccine in 2021. BioNTech/Pfizer recently increased its target for 2021 to 2.5 billion doses. By comparison, CureVac will deliver just under 100 million doses in 2021 without further expansions, but is already valued over $20 billion on the stock market. In 2022, these capacities could increase massively, with Moderna targeting over 3.5 billion doses - with a market capitalization of just under 72 billion US dollars. The high capacity shows that the current shortage is only a transitional phase and that the industry is also expecting and preparing for booster vaccinations.
Vaccine for everyone: Go-ahead from China for BioNTech?
Currently, mRNA vaccines are only approved for adults (Moderna from 18 and BioNTech/Pfizer from 16 years). Children represent more than 15 percent of the total population in Germany and almost 24 percent in the USA. BioNTech/Pfizer has also recently published positive study results in this area, which prove an astonishing efficacy of 100 percent with unchanged good tolerability. Applications for approval have already been submitted to the European Medicines Agency (EMA) and the American Food and Drug Administration (FDA).
A major strategic success for BioNTech/Pfizer would be a possible approval in China where the two companies are currently negotiating with the Chinese regulatory authority. China already vaccinates with its own vaccines including those from the companies Sinovac, Sinopharm and Cansino - although their effectiveness seems to be significantly lower than that of the BioNTech vaccine. Approval of their vaccine in China could offer great potential for BioNtech/Pfizer: China is the world's most populous country after India with 1.4 billion people and the price per dose in China could also be higher than in Europe.
Discussions regarding the withdrawal of patents miss the point
With its latest move the US government has sided with many poorer countries calling for the suspension of patent protection for Covid 19 vaccines. A suspension would theoretically allow manufacturers around the world to produce the vaccines without paying royalties. But this is only theoretical. The patent alone is not enough. For one thing, capacity is crucial: BioNTech/Pfizer want to deliver more than 2.5 billion doses of vaccine in 2021, Moderna plans around 1 billion doses. In 2022 the combined capacity is expected to be around 5.5 billion doses. This should fully exhaust mRNA vaccine production capacity worldwide and even additional manufacturers would not be able to expand it.
On the other hand, BioNTech has 20 years of in-depth mRNA know-how, and yet even BioNTech in cooperation with Pfizer is not able to set up a manufacturing plant for vaccines in less than 12 months. Manufacturers who do not have this know-how are likely to need considerably longer even if they were given the mRNA "recipe". Then there are the extremely demanding logistics that the vaccine requires as it can only be transported at below -70°C. Here too, capacities are at their limit. In addition BioNTech/Pfizer as well as Moderna have invested billions in the development of the vaccine. Without the innovative strength, the associated entrepreneurial risk and the considerable financial outlay there would be no mRNA vaccine today. This should be rewarded and not punished also in view of possible future challenges.
Surgery backlog and shortages of medicines - huge pent-up demand in the healthcare sector
The MSCI Healthcare stock index in euros underperformed the broad global stock market by more than five percent in the first four months of this year. Within the healthcare sector the performance was very mixed - similar to last year. Vaccine manufacturers, diagnostics manufacturers and IT service providers in the health care sector have also benefited from the Corona pandemic. The tailwind for diagnostics manufacturers of Covid 19 tests continued in the first quarter of 2021, but the wind could shift in the course of the year because of the continuing success of vaccination.
Many pharmaceutical companies but also medical technology companies suffered heavily from the Corona pandemic. Patients did not show up and thus examinations, operations or therapies were postponed, medicines were not prescribed. Recent data from the UK show that both the length of waiting lists and waiting times for operations have reached a 10-year high. The health sector has a huge backlog that is likely to be released after successful vaccination campaigns. The first quarterly figures of this year already point to a strong recovery - especially in the USA and Asia.
Health sector - soon back among the winners
Booster or revaccinations, the extension of vaccinations to children and adolescents as well as the need to quickly adapt to more aggressive mutations should ensure continued high demand for the mRNA vaccine manufacturers. However, not only the vaccine manufacturers would benefit from comprehensive and area-wide vaccination campaigns and the associated herd immunity, but ultimately also the health care sectors that have been hit by the pandemic.
*CureVac: The Tübingen-based biotech company CureVac is about to receive (emergency) approval from the EMA for its mRNA vaccine and could start vaccinating as early as June.
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