The biotech industry has been at the top of the news cycle for the past six months, and with good reason. Following the start of the COVID-19 outbreak, several biotechs started working around the clock to create a vaccine for the disease. However, each of them had to deal with one major obstacle: time. According to data from the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA), the process of developing and launching an effective vaccine usually takes between 10 and 15 years.
Despite this inconvenient fact, several companies have raced through the early stages of the development of their respective candidates at a record pace. Two such biotechs are Moderna (NASDAQ:MRNA) and BioNTech (NASDAQ:BNTX). Investors have rewarded both of these companies for their efforts. Year to date, shares of Moderna are up by 255%, while BioNTech's stock is up by 97%. Meanwhile, the S&P 500 has gained 2.1% on the year. Could Moderna and BioNTech keep beating the market in the long run?
BioNTech's COVID-19 program
BioNTech is collaborating with pharma giant Pfizer to work on a potential vaccine for the novel coronavirus. The two companies originally had at least four different candidates in their BNT162 program. In April, BioNTech and Pfizer started phase 1/2 clinical trials for these experimental vaccines in Germany, while they started a parallel study in the U.S. in early May.
Two of their candidates -- dubbed BNT162b1 and BNT162b2 -- proved to be the most promising, and the U.S. Food and Drug Administration (FDA) granted both the fast-track designation in July. Eventually, BioNTech and Pfizer chose BNT162b2 as their lead candidate because it showed a stronger safety profile and had the potential to be more effective than BNT162b1.
BioNTech and Pfizer started a phase 2/3 clinical trial for BNT162b2 in July. The two companies have notched several contracts -- including with the governments of the U.S., the U.K., Japan, Canada, and the European Union (EU) -- to supply millions of doses of their vaccine candidate starting as early as late 2020, pending regulatory approval. Pfizer's CEO, Albert Bourla, said the company would know by the end of October whether its vaccine is effective.
Moderna's COVID-19 program
Moderna was one of the first to start clinical trials with its experimental vaccine, mRNA-1273. Collaborating with the National Institutes of Health, the company kicked off a phase 1 study in mid-March. Even before wrapping up its phase 1 trial, the biotech started a phase 2 study in late May. Then, the company initiated a phase 3 trial on July 27.
Moderna planned to enroll roughly 30,000 participants for this late-stage study, the primary endpoint of which will be the prevention of symptomatic COVID-19 disease. The company said on Twitter that as of Sept. 11, it had enrolled 23,497 people. Moderna plans on manufacturing 20 million doses of mRNA-1273 by the end of the year.
A few more things are worth mentioning regarding Moderna's COVID-19 efforts. First, the interim data from its phase 1 clinical trial for its vaccine were published in The New England Journal of Medicine. This data showed that mRNA-1273 did not produce any severe adverse reaction, and it also induced neutralizing antibodies in all participants (antibodies are proteins that defend healthy cells from pathogens).
Second, Moderna has received funding from several third parties over the past eight months -- funding it was able to attract thanks to its COVID-19 efforts. For instance, the biotech received roughly $955 million from the Biomedical Advanced Research and Development Authority (BARDA) to help speed up and support the development of mRNA-1273.
Lastly, a few governments have also shown interest in Moderna's experimental vaccine. The U.S. government signed a deal with the biotech for 100 million doses of the vaccine for up to $1.5 billion, pending regulatory approval. Moderna also reported that it was in talks with the EU and the government of Japan to pen similar deals.
Are they buys?
It's essential to note that neither BioNTech nor Moderna has any approved products on the market at the moment. Further, their current valuations are tied to their COVID-19 programs. If these fail, both stocks will crash. However, both companies seem to be well-positioned, and both could benefit from their efforts, especially considering the large worldwide need for a COVID-19 vaccine.
Thanks to the funding they have received, neither biotech is likely to run out of capital anytime soon -- or even resort to dilutive forms of financing, which is good news for investors. Finally, some of their other pipeline programs could also bear fruit. BioNTech and Moderna both have more than a dozen clinical compounds currently in development, although many of these are still in their early stages.
All things considered, BioNTech and Moderna seem like risky bets, but that risk could turn into huge rewards. Still, for investors looking to initiate a position in either biotech stock, it is probably best to start small.