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The Challenges Vaccine Stocks Face As They Try To Fight Delta Variant

Vaccine stocks Pfizer (PFE) and Moderna (MRNA) think they can get a handle on the coronavirus’ delta variant. The two, along with other vaccine makers, have ambitious booster shot plans. But regardless of the outcome, experts say the Covid donnybrook is far from over.




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There’s a long road ahead for these vaccine makers, whose ultimate aim — achieving herd immunity and ending the pandemic — is nowhere in sight. Moderna, Pfizer and its partner BioNTech (BNTX), as well as the likes of Johnson & Johnson (JNJ) and Novavax (NVAX) face a bumpy road that could bring great fortune along the way.

But navigating it won’t be easy.

Several challenges remain. The companies still face vaccine holdouts. And, though vaccine supplies in the U.S. are plentiful, the rest of the world is falling behind. The more unvaccinated people there are, the more chances the virus has to spread — and mutate again. Meanwhile, there are about 48 million children in the U.S. under the age of 12 who still can’t be vaccinated.

Vaccine stocks also are running a race against a dwindling clock — getting shots in more arms before delta has the chance to become a fitter mutation.

“It’s not the last variant,” Dr. Julie Swann, North Carolina University’s department head of Industrial and Systems Engineering, said in an interview. “One question is, is there going to be a worse variant? We don’t know. Eventually, everyone will be touched by the virus that causes Covid, with infection or the vaccine itself.”

Vaccine stocks are making strides, though. The Pfizer/BioNTech vaccine just won Food and Drug Administration full approval for people ages 16 and up. Moderna also just asked the FDA to approve its vaccine for adults. Further, a Centers for Disease Control and Prevention panel is expected to discuss booster shots for all next week. A positive vote for that strategy could bolster vaccine stocks.

Vaccine Stocks’ Good News

The bad news for society is good news for vaccine stocks.

Prior to the pandemic, Pfizer produced 200 million doses a year in its entire vaccine portfolio, Chief Executive Albert Bourla said on the company’s recent earnings call. Since December, the company has produced 1 billion doses of its BioNTech-partnered Covid vaccine alone. In the first two quarters of 2021, Pfizer reported a combined $33.56 billion in sales. That’s already at 80% of what it generated last year.

Moderna, which had no commercial products before December, expects to make 800 million to 1 billion doses of its Covid vaccine this year. Similarly, Moderna has reported nearly $6.3 billion in sales this year. It also became profitable for the first time in the first quarter. Chief Executive Stephane Bancel warned on the company’s recent earnings call that the company already faces supply constraints for 2021.

Demand Will Continue This Year

The demand will continue for some time. Though analysts expect both profits and sales to peak this year, according to FactSet. Pfizer earnings are expected to stagnate from 2022 on. Sales are expected to diminish through 2024 — though still remain above pre-pandemic levels. Likewise, analysts project a decline in Moderna’s sales and earnings beginning in 2022. They expect another turnaround in 2025.

But that’s all contingent on the hope that delta won’t mutate again. If it does, the runway extends for vaccine stocks. Moderna expects to make 2 billion to 3 billion doses in 2022, dependent on the dosage of the booster shot. And Pfizer recently called for 4 billion doses in 2022. Some countries are already looking for 2023 and 2024 shots, Pfizer and Moderna executives said on their recent earnings calls.

Even that might not be enough.

If the companies’ most bullish expectations come to fruition, they’ll make 7 billion doses combined in 2022. That’s enough to fully inoculate 3.5 billion people — less than half the world’s total population. And that’s before backing out all the doses that may go to booster shots for people who’ve already received two doses.

Other vaccine stocks could help fill the gaps.

Johnson & Johnson has a single-dose vaccine in the U.S. So far, 14 million people have received it. Novavax recently said it’s planning to ask for the FDA to authorize its Covid vaccine this quarter. There are also shots from Russia, China and India at play, though none of those are allowed in the U.S.

Boosters Might Not Be Enough

But experts say the booster shots might not be enough to defeat delta. So, the strategy bolstering vaccine stocks right now might not actually work in the grand scheme.

From an epidemiological standpoint, it makes more sense to inoculate more people rather than boosting protection for already-vaccinated individuals.

The reason is the virus that causes Covid is mutating. Unlike other viruses, it doesn’t mutate to escape vaccination. It mutates because it’s replicating so rapidly inside people. Mistakes occur when cells replicate rapidly. Those mistakes can create powerful viral mutants.

This means large pockets of unvaccinated people essentially become reservoirs for the virus to mutate. Michael Breen, GlobalData’s director of infectious diseases and ophthalmology, says it would make more sense to inoculate children before offering booster shots.

“It’s a little counterintuitive to give third (booster) doses when they’re (children) completely unprotected,” he said in an interview. “It’s counterintuitive to the overall goal.”

In theory, companies could do both. But studies in children younger than 12 are still ongoing. A Pfizer spokeswoman recently confirmed to Investor’s Business Daily that data from testing in children ages 5-11 is due in September, with the 2-5 age group expected to follow “shortly after.”

Moderna didn’t respond to a request for comment.

Immunity Is Waning Over Time

It’s true that immunity is waning over time. The delta variant is also packing a neat punch to the overall protection offered by vaccines. At six months, new CDC data show Pfizer’s vaccine is 84% effective and Moderna’s is 93% protective.

“Recent data make clear that protection against mild and moderate disease has decreased over time,” Surgeon General Vivek Murthy said during a recent news conference. “This is likely due to both waning immunity and the strength of the widespread delta variant.”

Importantly, the vaccines all remain adept at preventing infection severe enough to require hospitalization or cause death. But the U.S. is still planning its booster shot strategy. Initially, the FDA and CDC signed off on booster shots for immunocompromised people.

Now, the strategy will pivot to boosting all recipients of messenger RNA vaccines. Vaccine stocks Pfizer, BioNTech and Moderna popped on that news. Companies were bullish on the possibility of boosting vaccination on their recent earnings calls.

In recent testing, the companies say a boost from their vaccines can generate antibodies against a number of variants.

Vaccine Stocks Rise As Makers Stand Behind Boosting

Vaccine makers stand firmly behind the booster strategy.

“Given this intersection between a rising force of infection and waning immunity, we believe a dose three of a booster will likely be necessary to keep us as safe as possible through the winter season in the Northern Hemisphere,” Moderna President Stephen Hoge said recently on the company’s earnings call.

J&J recently said a booster shot of its vaccine led to a large number of antibodies that bind to the virus’ spike protein. In two small, early-stage studies, booster recipients experienced a ninefold increase in antibody levels vs. a month following the single dose in the J&J regimen.

There also are studies underway testing out mixing and matching vaccines, J&J told IBD in an email. U.S. health officials have remained mum on whether J&J recipients will need a booster shot. J&J says its shot is effective through at least eight months.

Mixing vaccines is a heterologous strategy. This uses two different ways of helping the immune system identify the virus, SVB Leerink analyst Geoffrey Porges says in a report to clients.

Right now, vaccine stocks for Pfizer, BioNTech and Moderna are hitting a major stride as number of shots rises. But that could change if a preference emerges for mixing shots. That would allow other vaccine stocks to shine.

Next Challenge For Vaccine Makers, Vaccine Stocks

Meanwhile, Porges predicts vaccine makers’ next challenge is right around the corner.

“There is probably one more iteration of the virus, with potentially even greater fitness,” he said, citing an expert he interviewed.

That expert “expects that this iteration will emerge later this year, and could occupy our attention in the winter months, before we finally emerge from the serious phase of the pandemic around March next year, having reduced Covid to an endemic, but still significant, disease.”

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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