At the height of the pandemic, investors rushed to snap up vaccine makers, the closest bets they could make. But falling coronavirus infection numbers mean a reversal of fortunes for these Covid-19 winners, with share prices sliding on sales uncertainty and questions around future growth.
Shares of Pfizer, which develops vaccines and antiviral drugs, have fallen 46% from their peak in late 2021, while shares of its German vaccine partner BioNTech have fallen 75% and rival Moderna has fallen 79%.
Less successful vaccine makers have seen even steeper declines: Novavax’s shares have fallen 97% since the start of 2021, and the company’s Covid vaccine has sold far less than its messenger RNA vaccine.
BMO Capital Markets analyst Evan Seigerman said investors who pushed these stocks higher during the “sugar rush” are now “mentally over the pandemic.”
“In 2020, interest rates are zero, everyone has extra cash because they’re not spending it on going out, and there’s fiscal stimulus, so what are you going to do with your money? Invest it in the stock market,” He said.
With the stock price rally now over, the company has yet to lay out a compelling vision for post-pandemic life. The COVID-19 vaccine market is plagued by uncertainty due to unpredictable demand, and companies are using their windfalls to fund ambitious plans that will take years to realize.
Pfizer, which has the best-selling COVID-19 vaccine, expects vaccine sales to fall 64% this year compared with 2022, and sales of antiviral drug Paxlovid to fall 58%.
Pfizer CEO Albert Bourla said on the company’s most recent earnings call that the company will have more clarity and certainty about the future of its COVID-19 products by the end of the year. “We are acutely aware that all of this uncertainty makes it difficult to predict Pfizer’s future revenues and has impacted our stock price,” he said.
UBS analyst Michael Leuchten said that even during the pandemic, many experts predict that vaccines will not provide a safe annual revenue plan. “For anyone who’s ever paid attention to a pandemic, it’s obvious that this isn’t going to happen,” he said.
Pfizer’s future sales will depend on wildcarding new variants that evade previous protection. Factors to consider include the number of people suffering from vaccine fatigue and the excess demand from the U.S. government when drugmakers begin selling Paxlovid commercially in the United States.
Moderna and BioNTech also hope that the northern hemisphere winter of 2023 will provide more certainty for the “normal” COVID-19 vaccine market. Moderna President Stephen Hoge said the company expects sales of the new coronavirus vaccine to reach $6 billion to $8 billion this year, but does not know whether this situation will be repeated or decline slightly in the next few years. “It really depends on vaccinations in the fall,” he said.
How investors assess the future of companies like Moderna and BioNTech depends on their view of the potential of mRNA, which was initially used to rapidly produce adaptable COVID-19 vaccines in the pandemic but is also being trialled in cancer treatments.
The vaccines’ high initial efficacy has excited some investors and boosted hopes that mRNA can succeed in other large vaccine markets, from improving the efficacy of flu shots to tackling thorny targets like HIV. A revamped flu vaccine trial is looking more positive after early results from Moderna’s flu program were disappointing. However, shareholders are now more aware that mRNA is not the Holy Grail.
Gareth Powell, head of healthcare at specialist fund manager Polar Capital, said mRNA was following previous platforms such as antibodies, and investors would be excited about the developers initially using the technology, but those companies would soon be copied by others. Other large vaccine makers, including Sanofi and GlaxoSmithKline, are currently working on mRNA.
“They are considered to have these unique technology platforms, but it’s less about the platforms themselves and more about what they develop in the pipeline,” he said.
BioNTech may face bigger challenges. The company focuses on oncology, but its only approved product is in infectious diseases. The German biotech group hopes to use mRNA and other technologies to create personalized cancer treatments, but the vast majority of its projects are still in early-stage trials.
The windfall from the COVID-19 vaccine has given the company funds to support research into many vaccines. But investors are also nervous about the company’s spending. Last month, the company lowered its forecast for full-year research and development expenses by 400 million euros in an attempt to “increase cost awareness.”
“I think it’s smart. If you have billions of dollars in revenue, you don’t want to be a cash-burning biotech company,” said Suzanne van Voorthuizen, an analyst at Van Lanschot Kempen. She said that if the company controls costs, the market capitalization of $27 billion is quite attractive because it has more than 17 billion euros in cash and cash equivalents.
Ryan Richardson, chief strategy officer of BioNTech, said that the company is focused on the medium and long term, and most shareholders are long-term investors. “We don’t pay much attention to stock prices,” he said.
“They certainly want to see more investment . . . to realize the full potential,” he said. “But on the other hand… they also want us to manage our income statement and expenses in a prudent way, which can sometimes require difficult trade-offs between the short and long term.”
He said the company will be entering a “data-rich” 12 months or so, with an opportunity to demonstrate its capabilities in oncology to investors. Investors will still have to wait until at least 2026 for approved oncology products.
Pfizer has also quickly poured its coronavirus cash into bolstering its drug pipeline, aiming to launch 19 new products in 18 months, most of them discovered internally, and add at least $25 billion through business development in 2030 risk-adjusted income.
The New York-based pharmaceutical group has acquired four companies – Arena, ReViral, Biohaven and Global Blood Therapeutics – and is expected to contribute about $10 billion in revenue by 2030. It also plans to acquire oncology-focused biotech Seagen for $43 billion, which is expected to generate sales of more than $10 billion in 2030.
Powell said investors were concerned that Pfizer was paying a high price for the products it acquired. “They punish them for increasing investment in the short term without giving them any reward on the back end,” he said.
Pfizer said its approach is to look for “opportunities where we have the ability to add substantial value to rapidly bring new breakthroughs to patients.”
Linden Thomson, principal manager of the AXA IM Framlington Biotech fund, compared these vaccine companies to others that have outperformed on a single drug, such as Gilead’s hepatitis C drug and, to some extent, Vertex’s Cystic fibrosis drug treatment.
Companies the fund holds, like Moderna, have massively expanded manufacturing capabilities and gained a lot of experience with new technologies because they are so widely adopted, she said.
While some investors are skeptical of companies without long-term growth plans, she said Moderna has met all challenges.
“My point is, you should trust them because, honestly, they’ve checked out all the questions they ask,” she said.
Thomson said that in future outbreaks, vaccine manufacturers may still want to invest in developing vaccines against a new pathogen if they think they have a chance of successfully dealing with it. “People have seen how much profit can be made from this,” she said.
However, she added that companies may be more cautious in assuming how long the new reality of the pandemic will last. “When there is a next pandemic, investors may look back and assume that changes in our lifestyles may last for a few years, rather than presuming that this will be the new normal in the long term,” she said.
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