This is a big week in the fight against the coronavirus disease 2019 (COVID-19) pandemic. On Monday, Dec. 14, the very first COVID-19 vaccine approved by the U.S. Food and Drug Administration (FDA) for emergency use was administered to millions of frontline workers across the country. This comes as COVID-19 deaths per day in the U.S. are topping 3,000.
There are currently around two dozen COVID-19 vaccines and treatments in development, all of which may help to abate or end the pandemic.
Vaccine developers deliver incredible efficacy
The first vaccine to be given emergency use authorization (EUA) from the FDA is Pfizer's (NYSE:PFE) and BioNTech's (NASDAQ:BNTX) BNT162b2. In mid-November, Pfizer and BioNTech reported a primary vaccine effectiveness of 95% in their late-stage trial. This is currently the high-water mark for COVID-19 vaccine efficacy. Some 2.9 million doses of BNT162b2 were shipped to more than 600 pre-determined locations this week to inoculate frontline workers.
However, the Pfizer/BioNTech first-mover advantage will likely be short-lived. On Dec. 17, Moderna (NASDAQ:MRNA) is expected to have its vaccine candidate, mRNA-1273, reviewed by an FDA advisory panel. In the late-stage COVE study, Moderna's vaccine delivered a primary efficacy of 94.1%. If it were to receive a positive recommendation from the panel -- the Pfizer/BioNTech vaccine was recommended for approval by a vote of 17-4, (with one abstention -- it wouldn't be surprising to see up to 20 million doses shipped within days.
Not to be forgotten, AstraZeneca (NASDAQ:AZN) and Oxford University also reported efficacy for their COVID-19 candidate in November. One cohort, which received two full doses at least one month apart, showed a vaccine effectiveness of 62%. A separate cohort, which received an initial half-dose followed by a full dose at least a month apart, demonstrated an efficacy of 90%. Though the combined efficacy of these two arms was "only" 70%, AstraZeneca's plan to sell its vaccine at cost (about $3 to $4 per dose) could be more than enough to entice usage.
According to Evercore ISI analyst Josh Schimmer in August, COVID-19 vaccines could be worth up to $100 billion in sales and $40 billon in after-tax profits. Figures like this are precisely why vaccine developers have been a hot commodity on Wall Street.
Yet there's an exceptionally important figure that no one seems to be talking about -- but they should be.
Wall Street is overlooking one monumental factor: Choice
Back in May, when researchers were still trying to learn everything there was to know about COVID-19, Pew Research Center asked Americans about their willingness to take a vaccine, if one were approved today. Some 72% of respondents were in favor of taking the vaccine. But by September, when Pew asked a new group of respondents the same question, only 51% were "definitely" or "probably" going to get the vaccine. In fact, the percentage of survey-takers who "definitely" plan to get the vaccine was halved (42% in May vs. 21% in September).
As of July 1, 2019, the U.S. Census Bureau estimated that 77.7% of the 328,239,523 people in this country were aged 18 and over. If Pew's poll were to reflect the opinions of Americans across the country, that's nearly 125 million adults that have no desire to get the vaccine.
For Pfizer/BioNTech, Moderna, and AstraZeneca/Oxford, a full-course treatment involves two doses. The cost of treatment is $39 for Pfizer/BioNTech, between $50 and $74 for Moderna, with the variance in price dependent on how much vaccine a buyer (i.e., country) purchases, and between $6 and $8 for AstraZeneca/Oxford, which have chosen to sell at cost. If we arbitrarily assume that each vaccine developer is responsible for a third of the U.S. market, we're talking about well over $4 billion in missed total addressable opportunity... just in the United States.
Trepidation toward a coronavirus vaccine may have to do with the record-breaking time frame these treatments were developed. Though primary efficacy has been off-the-scales good, we don't yet know whether receiving a vaccine halts transmission, or, more importantly, how long these vaccines will protect the recipient. Without answers to these questions, we could be talking about tens of billions of dollars in missed global opportunity.
Betting on COVID-19 stocks is risky
For advanced developers like Pfizer, AstraZeneca, or Johnson & Johnson (NYSE:JNJ), there are vast portfolios of brand-name drugs and devices to fall back on. But for clinical-stage developers like Moderna and Novavax, euphoria appears to be getting the better of investors.
Take Moderna as a good example. The company's valuation has ballooned to more than $61 billion on the hope that mRNA-1273 will drive more than $10 billion in annual sales. Though a real possibility in 2021, Moderna's sales are likely to retrace in each subsequent year as new treatments enter the market. It's worth noting that some of these mid-and-late-stage players may offer competitive advantages over Moderna. For instance, Johnson & Johnson's vaccine only needs to be administered in one dose. If it were to hit a similar efficacy to mRNA-1273, Moderna's vaccine would be phased out.
As I've previously described, Moderna is also valued at north of 10 to 12 times Wall Street's consensus sales forecast for 2023. Biotech stocks are usually valued in the range of 3 to 6 times peak annual sales.
In short, skepticism is warranted with Wall Street potentially overestimating the addressable opportunity for these companies.