Some investors enjoy taking a "basket" approach to investing in an emerging technology. Spreading their dollars across a few companies ensures their returns are tied to the overall technological trend, instead of one business or management team. Other investors, wanting to maximize returns (and willing to take more risk), will dig deeper to try and pick a winner in the industry.
For those looking to choose between shares in makers of coronavirus vaccines, two companies that are leveraging an emerging gene-based medicine technology present an opportunity to profit. The upside isn't just in the coronavirus vaccine, it's also in what it means for treating diseases in the future. Both Moderna (MRNA +0.07%) and BioNTech SE (BNTX 1.42%) are using messenger ribonucleic acid (mRNA or messenger RNA) -- genetic instructions that tell cells to make proteins that fight, or even prevent, diseases -- to create a vaccine for the novel coronavirus, and investors looking to choose between them should focus on a few differentiating factors.
After yesterday's news demonstrating the efficacy of the Pfizer/BioNTech vaccine candidate, investors may think the battle here is over. However, the news, while exciting, is just the first step down the path to approval, distribution, and profits for a vaccine.
Image source: Getty Images.
The story of BioNTech
BioNTech was founded in 2008 with the idea that every person's cancer is unique, and that messenger RNA could provide the ability to engineer individualized treatments. This idea was validated in 2017, when all 13 people treated with a drug genetically matched to each person's skin cancer saw a significant reduction in the risk that the cancer would spread.
The process involves computer modeling in which scientists compare DNA from the patient with a sample of healthy blood. By identifying the mutant proteins associated with the cancer, they can target them with a solution specific to the cancer in that patient's body. The company has 12 products currently enrolled in 13 clinical trials with respected partners such as Regeneron, Sanofi, and Pfizer (PFE +1.06%) -- the latter, as you may have heard, for a COVID-19 vaccine. This vaccine candidate is the only trial where management expects results in 2020 beyond phase 3, and yesterday's preliminary data showed that the candidate proved 90% effective at preventing COVID-19 among trial participants.
The story of Moderna
Moderna was the largest private biotechnology company in the world before going public. The company has been extremely secretive in the past -- not publishing experimental data, refusing to share which diseases it was targeting, and even making some job applicants sign non-disclosure agreements.
The company's CEO, Stephane Bancel, has offered no apologies, admitting the culture is intense. Since taking the CEO role in 2011, Bancel has developed a reputation for being more inclined to promote the company to Wall Street than to the scientific community. Despite Moderna's pipeline of 21 drug programs targeting many viruses and several cancers, the company's COVID-19 vaccine will be its only drug with results from a phase 3 trial this year.
What everyone is talking about
For its COVID-19 vaccine, BioNTech chose to partner with Pfizer thanks to the latter's experience in vaccine research, regulatory submissions, and manufacturing and distribution capabilities. The companies have enrolled 30,000 participants across 120 global sites, including 39 U.S. states. The trial is focused on adults aged 18 to 85, and the two companies have received funding and orders for as many as 900 million doses combined from the German government, the European Union, and the U.S. government, to begin in late 2020. For production, the companies have two sites in Germany, a partnership with Chinese firm Fosun Pharma, and three sites that Pfizer is activating in the U.S.
The companies believe they can supply 100 million doses by the end of this year and 1.3 billion by the end of 2021. In an unusual move, Pfizer's CEO wrote an open letter in July outlining the hurdles to filing for an emergency use authorization (EUA) and promising to do so quickly should the companies get positive results at the end of November. With the announcement of exceptionally positive data, the company is on track to file for the EUA the third week of this month. Ultimately, the partnerships, manufacturing, and timelines instill confidence that once approved, doses of BioNTech's vaccine will follow quickly.
Like BioNTech, Moderna chose to partner with a more established company in the pharmaceutical space. Lonza Group, Moderna's partner, is helping to establish manufacturing capacity across the U.S. and Switzerland. Benefiting from nearly $1 billion from the National Institutes of Health, Moderna was able to develop its vaccine candidate in just 63 days, becoming the first to conduct trials of a COVID-19 vaccine in humans in mid-March. Its vaccine entered phase 3 in late July and has 30,000 participants enrolled, with preliminary analysis expected late this month.
After these results, the company could file for an EUA next month, making the drug available to the broader public in the spring. Management has signed deals with the U.S. for 100 million doses ($1.5 billion), with Canada for 20 million doses, with Japan for 50 million, and with Qatar for an undisclosed amount.
All that looks like good news for the company, but questions have nonetheless arisen around Moderna executives' flood of stock sales as the shares hit highs this summer. And now that Pfizer and BioNTech have the lead in getting a highly effective vaccine distributed throughout the world, the pressure is on for Moderna to be close behind.
How to choose
Both companies presented a risk for investors with this previously unproven approach, but messenger RNA has long had the potential to transform medicine by delivering more potent treatments that are easier to manufacture if successful. Given recent news, it looks like BioNTech and Pfizer have made the leap from the lab to the real world with the efficacy of their vaccine candidate. The test now will be distribution.
In addition to each company's pipeline, investors have to consider what the vaccine could mean financially for both immediate sales and future funding. Now that BioNTech has created a proven mRNA-based vaccine within a year of discovering a new virus, the takeaway is clear: Funding, not science, was the hurdle limiting development of mRNA treatments before 2020. Thanks to BioNTech's demonstrated early success using mRNA and its broader collaboration with Pfizer -- and because of the ongoing questions around stock sales by Moderna executives -- deciding between these two cutting-edge stocks is clear to me. I'll take shares of BioNTech over Moderna for what's likely to come in 2020 and beyond.
