Update: The Vaccine Race Investment Case Enters a New Phase

After a pair of stunning announcements, two biotech upstarts take a big step toward approval, and toward potentially charting a less-travelled path to long-term profitability.

This past August, we published a Fundamental Thinking article titled “Untested” in which we discussed how the race for a coronavirus vaccine had become an important proof of concept for new models of discovery and development that could eventually shake up the vaccine industry. Three months later, some of those models are on the verge of crossing the finish line. In a series of startling announcements, two different joint ventures—one between Pfizer and the German-based biotech company BioNTech, and the other between US-based biotech firm Moderna and the US National Institutes of Health—reported the phase 3 trials of their vaccines showed effectiveness rates of around 95%. Both teams moved quickly to file for regulatory approval. UK-based AstraZeneca and Oxford University then reported results for two dosing regimens with efficacy ranging from 62% to 90%. Here, Harding Loevner health care analyst David Glickman answers clients’ questions about these latest developments, what happens next, and what it means for our investment case going forward.

What is the likely timeline now for approval of a vaccine?

Assuming the regulators don’t see anything concerning in the safety data submitted, I think it’s reasonable to assume Emergency Use Authorizations (EUAs) will be granted for Pfizer-BioNTech’s and Moderna’s vaccines before the end of 2020. (Indeed, one has already been granted for the former in the UK.) The EUA sets a low bar of 50% efficacy, and both teams vaulted well above that. AstraZeneca’s studies are harder to interpret, as a smaller study group that was mistakenly administered a half dose followed by a full dose (and also did not include any patients over the age of 55) reported better results than the group with two full doses. The company will now run an additional phase of the trial to more thoroughly compare the two regimens. It should be noted that the reported rates for all three teams are still preliminary measurements recorded just a few weeks after the vaccines were administered. A total of only about 100 to 200 people in the control groups in each trial became infected compared to just between five and 10 in the respective vaccinated groups. While those infection reduction figures are statistically robust at this point, the figures could move around as the trials continue to run and more results come in. We also still know little about how long the immunity will last.

What is the timeline for the production ramp and rollout?

Taken together, the Pfizer and Moderna teams expect to have around 70 million doses available by the end of 2020. With each vaccine requiring two doses, that means approximately 35 million people could be vaccinated by February. AstraZeneca has yet to provide a schedule, but it is expected that production for all three approaches could ramp up quickly, potentially totaling in the billions of doses in 2021 just from these companies alone. Of the three, AstraZeneca’s vaccine poses the fewest logistical hurdles as it requires only simple refrigeration. Moderna’s can be kept in conventional refrigerators for up to a month. Pfizer-BioNTech’s can be stored that way for only five days or in dry ice coolers for up to 15 days but needs to be kept at about -94 degrees Fahrenheit for longer periods. Military and logistics companies that normally handle medications of this nature, such as FedEx, have been working to ensure the vaccines’ distribution to hospitals, clinics, and pharmacies.

What could this mean for other vaccines in development?

All three of the vaccines nearing approval are genetic-based approaches. Patients are inoculated with fat molecules or viral vectors containing a strand of genetic material that encodes for a protein on the surface of the coronavirus. This genetic fragment (mRNA in the case of Pfizer-BioNTech and Moderna, DNA in the case of AstraZeneca) is then delivered inside our bodies’ cells, whereupon it directs our own cells to produce the viral protein antigen that stimulates our bodies’ immune response. This is the first time genetic-based approaches have been successfully used to develop a vaccine, and they have proven considerably faster than—and, based on the data just reported, in some cases at least as effective as—developing a vaccine through traditional methods of growing attenuated viral antigens in eggs or hamster cells. That said, they are not the only approaches that have shown promise, and dozens of other candidates are working their way through clinical trials. Some of these employ new production and delivery methods, while some are more traditional, which, assuming they also prove effective, could be preferable to people who worry about the lack of long-term safety data from the newer types of vaccines.

What is Harding Loevner’s reaction as investors to the latest vaccine developments?

We were as surprised as anyone that Pfizer-BioNTech and Moderna recorded efficacy rates of around 95%. Assuming the first wave of vaccine makers and their suppliers can scale up as planned, much of the projected supply is already under contract. However, as more candidates report clinical trial results, supply could become plentiful in 2022. AstraZeneca and Johnson & Johnson, which uses a similar approach to AstraZeneca, have committed to very low prices during this initial pandemic period, so that may cause pricing pressure starting late in 2021. Another wildcard is what the demand could look like. Before these data were announced, in various polls only 50–60% of Americans said they were willing to take a vaccine when it becomes available. Hopefully that percentage will climb with the compelling data recently reported.

We currently don’t cover any of the companies in the joint ventures that are showing success developing vaccines. We have not covered Pfizer or Astra Zeneca because of their sluggish historical growth track record, and their long-term growth prospects have not materially changed given that neither company used its own platform to discover its vaccine. BioNTech and Moderna, however, are in a different category for us. Neither has had a track record of profitability or durable cash flows, but both should become profitable in 2021. At that point, they may become viable candidates for coverage.

What are the longer-term implications of the current vaccine race?

This is where we think things get more interesting, particularly for Moderna and BioNTech. I have no special insight into either company’s ability to capture a greater share of what promises to remain a highly competitive market for the coronavirus vaccine. To me, what is more interesting are the broader longer-term applications of their mRNA technology. When you look at the pipeline for these companies’ future products, much of their focus falls outside the most established vaccine areas. In all established major vaccine categories except the flu, efficacy and safety are very good and the prices are relatively cheap wherever there are more than two players. So, for most of these categories, the likelihood of an mRNA vaccine offering some compelling point of differentiation is low. Instead, Moderna and BioNTech are focusing more on diseases like the flu, where efficacy rates have traditionally been much lower, or on diseases for which no vaccine is currently available. Both companies are also applying their technology platforms to the field of oncology, which has been a target of vaccine-type approaches for decades, but with limited success. Many immunotherapy approaches attempt to re-engineer our immune systems to detect and destroy cancer cells. It is possible, though, re-engineering with mRNA could prove more targeted and efficient. While it’s difficult to predict at this point how effective this approach will be, the accomplishments of Moderna and BioNTech this year certainly mean that any early data coming out of these new areas of exploration will warrant our attention.

What did you think of this piece?


Analyst David Glickman, CFA contributed research and viewpoints to this piece.


The “Fundamental Thinking” series presents the perspectives of Harding Loevner’s analysts on a range of investment topics, highlighting our fundamental research and providing insight into how we approach quality growth investing. For more detailed information regarding particular investment strategies, please visit our website, www.hardingloevner.com. Any statements made by employees of Harding Loevner are solely their own and do not necessarily express or relate to the views or opinions of Harding Loevner.

Any discussion of specific securities is not a recommendation to purchase or sell a particular security. Non-performance based criteria have been used to select the securities identified. It should not be assumed that investment in the securities identified has been or will be profitable. To request a complete list of holdings for the past year, please contact Harding Loevner.

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