Just when the world could see a ray of hope after the approvals and initial rollout of COVID-19 vaccines, news of mutant strains from the U.K. and South Africa created a new reason to worry. Beside the threat to public health that these variants pose, what challenges do they present to vaccine makers?
The picture is nowhere near complete, but from what we know today, all the vaccines seem to perform well against the U.K. strain. A strain emanating from South Africa is what's causing the vaccine companies to adapt their plans. Here are some implications for Moderna (MRNA -4.38%), partners Pfizer (PFE -0.60%) and BioNTech (BNTX -0.42%), Johnson & Johnson (JNJ 0.04%), Novavax (NVAX 98.66%), and AstraZeneca (AZN -0.55%) that could also impact their shareholders.
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Are some vaccines better against variants than others?
Right off the bat, the question is whether the threat of the South Africa variant is more of a challenge to the efficacy of some vaccines than others. Four of the five companies have released information on effectiveness against the strain. While the available data varies, it looks like all five face declining efficacy rates.
The mRNA vaccines from Moderna and Pfizer had their large clinical trials before the South Africa strain was spreading widely, so there's no real-world data about effectiveness. Instead, the companies conducted in-vitro laboratory experiments, exposing blood serum from patients who had been vaccinated with their products to the variant virus and measuring the resulting neutralizing activity. The results from those studies and one from an independent team were that neutralization was significantly less by a similar amount for the two vaccines. Both companies say their vaccines would be sufficient to protect against the strain, also called B.1.351, but both are hedging their bets by looking at the strategies below, in part because they're concerned that effectiveness against the variant could wane more quickly than against the original strain.
The single-dose vaccines developed by Johnson & Johnson and Novavax are on later schedules, with the former potentially available by the end of February and the latter possibly getting authorization as early as April. That meant that both were tested in people exposed to the South African variant, and both proved to be less effective. Johnson & Johnson's vaccine had 57% protection in South Africa, where over 90% of trial subjects were infected with the variant, compared with 72% effectiveness in the U.S. The efficacy of the Novavax vaccine was 89% in a trial in the U.K. but fell to 60% in South Africa.
AstraZeneca is conducting a trial of its single-dose vaccine in South Africa but hasn't broken out data from that location separately, nor released any results from in-vitro experiments against the variant strains. But it has said it's working on a vaccine to target variants, which suggests some doubt about the efficacy of the company's current vaccine against them.
All the vaccines appear to have diminished effectiveness against the South African variant, but probably have enough to meet the 50% protection threshold considered to be effective. The vaccine that might have an edge is Johnson & Johnson's, because it had 85% protection against serious disease that was consistent across all variants.
Booster shots
All five companies intend to test the effectiveness of an additional shot to boost protection against the variants. You'd have to believe that if this strategy is adopted, the advantage goes to the single-shot products from Johnson & Johnson, Novavax, and AstraZeneca. A three-shot regimen would be logistically more difficult, making the mRNA vaccines less attractive both to patients and to providers.
If extra shots become the standard practice for fighting variants, don't expect it to have much effect on the vaccine companies' business in the short term. The worldwide demand for the vaccine is outstripping the supply and will do so for months. The additional demand from the extra shots would be longer term and could accrue to the company that can ramp up manufacturing the fastest.
New vaccine formulations
All five of these companies are also working on plans to develop a version of their vaccines that specifically target B.1.351. If successful, they could then offer combination vaccines that are equally effective against multiple strains, similar to annual flu vaccines.
In a race to deploy a multivalent COVID-19 vaccine, the mRNA companies could have the advantage. Moderna was able to design its vaccine and manufacture its first batch in only 42 days. Clear advantages of mRNA are the speed at which new vaccine candidates can be created and the simplicity of their manufacture.
Even if Moderna and Pfizer/BioNTech can design solutions specific to the South African variant, the implementation will be months down the road. It's unclear what testing the regulatory agencies will require for authorization. A rollout would also disrupt the manufacturing process, making it unlikely that any of the companies would try to launch a reformulation while still struggling to meet demand. AstraZeneca said this week that it is aiming for a vaccine that targets variants by this fall, but a successful launch on that schedule would be surprising.
What the rise of variants tells us about the vaccine business
What's incredibly unfortunate for public health today could actually be good news for vaccine investors in the long term. As new variants appear and spread, the need for new vaccine formulations or additional quantities of existing vaccines extends out in time. The COVID-19 vaccine business could evolve to resemble the flu vaccine business, with new multivalent versions released annually.
Pfizer pointed out this week that the "pandemic pricing" of its vaccine at $19.50 per dose is far from the price it normally gets for a vaccine, which is $150 to $175 per dose. The opportunity for a major price increase in future years as well as improvements in unit costs as manufacturing matures means a huge increase in margins are ahead.
An ongoing business from coronavirus vaccine that extends for years will be a substantial financial boost to the vaccine companies. Pfizer expects its COVID-19 vaccine to add $15 billion in revenue in 2021, with everything else in its huge portfolio amounting to about $45 billion on the top line.
The experiences of 2021 have been a boon to the biotech companies working on vaccines. The pandemic provided an opportunity to prove that new technologies (like mRNA) work at a large scale. All of these companies have also learned logistical and distribution lessons that will be applied to other products down the road.
The emergence of variants is giving us a glimpse into what the coronavirus vaccine business itself could be in the future. And that future could be a lot longer than people realize.
