The collective sighs of relief that greeted the announcements from Pfizer/BioNTech and Moderna were quickly followed by a flurry of questions relating to the efficacy, safety, and durability of these vaccines, as well as how quickly they might be made available, and how widely.
Although it’s certainly premature to start celebrating the end of the COVID-19 pandemic, the numbers are highly promising. At 95% effectiveness for the Pfizer/BioNTech vaccine and 94.5% effectiveness for the Moderna vaccine,¹ both exceeded expectations and are consistent with existing approved vaccines—such as those for measles and mumps—which have been in use for decades.
It may be reasonable to assume that other COVID-19 vaccines currently in the latter stages of development (Oxford University/AstraZeneca, Johnson & Johnson, Sanofi, and Merck) may have similar effectiveness levels because they all target the same part of the virus—the now-infamous infectious spike protein. The data sets for these vaccines are likely to be made available in the coming weeks.
Of course, it’s too early at this stage to properly evaluate the safety profile, durability, and long-term effectiveness of these vaccines, although the initial short-term safety profiles of each offer limited cause for concern. However, we won’t know further until the data is presented at an Advisory Committee on Immunization Practices/U.S. Food and Drug Administration (FDA) Advisory Committee meeting that will be held for each offering once Emergency Use Authorizations (EUAs) are submitted to the FDA.
Another important aspect we need to understand is the durability of these vaccines (the duration of protection offered by the vaccine after receipt of all recommended doses). Both candidates are mRNA vaccines and, if approved, would be the first of their kind to be licensed to treat an infectious disease in humans. Rather than introduce small or inactivated doses of the entire infectious organism, mRNA vaccines induce the body to produce antibodies against a small portion of the viral spike protein genetic material, which then triggers an immune response. In the past, mRNA vaccines haven’t precipitated a robust T-cell reaction, which may be the key to durability.
Additional COVID-19 vaccine considerations
A challenge with mRNA vaccines is that they’re relatively fragile and need to be stored at cold temperatures for transportation (-70 degrees Celsius for the Pfizer/BioNTech vaccine and -20 degrees Celsius for the Moderna vaccine). Logistics are being worked out from two giant cold-store centers—one in the U.S. state of Michigan and the other in Belgium²—but outside of the developed world, cold-chain distribution may pose a significant challenge.
Both the Pfizer/BioNTech and Moderna vaccines require recipients to receive two doses of the vaccine. It’s expected that up to 70 million shots will be produced this year (50 million from Pfizer/BioNTech and 20 million from Moderna), rising to a range of between 1.8 billion and 2.3 billion in 2021 (1.1 billion from Pfizer/BioNTech and 500 million to 1 billion from Moderna). This equates to—potentially—35 million people receiving either vaccine by year end and a further possible 900 million to 1.15 billion people by the end of next year.
We would note, however, that scaling up mRNA manufacturing from small clinical quantities to large commercial quantities has never been attempted before. The early entrants here will need to successfully navigate uncharted waters to achieve sufficient capacity in order to attain these distribution targets.
We look forward to seeing the full data sets at the upcoming advisory committee meetings and expect EUAs for both vaccine candidates to be approved by year end.
U.S. healthcare reforms will likely take a back seat
Indeed, an incoming Biden administration in the United States may likely prioritize the battle against the COVID-19 pandemic to a greater degree than the preceeding administration.
Broadly speaking, we can expect to see the Biden administration take a more federally focused approach to tackling the pandemic. Measures could include national testing guidelines, mask mandates, and directives over the control of vaccine distribution and allocation.
We think that Operation Warp Speed is likely to continue in its current form, but perhaps with some incremental funding for things such as personal protective equipment and emerging therapeutics. We may also see additional targeted financial support for hospitals, depending on the trajectory of COVID-19 cases.
Given the likely outcome of the recent U.S. election—a Democratic president, a narrow Republican Senate, and a narrow Democratic House—we expect legislative gridlock to continue for at least the next two years. In our view, this should prove to be a positive for healthcare investors given the diminished prospects for substantive healthcare legislation. Specifically, we believe that gridlock will lower the probability of drug-pricing reform as well as substantive changes to the delivery/payment systems in the United States. Also, gridlock reduces the likelihood of changes to the corporate tax code.
In short, 2021 is likely to see a new administration focus on the pandemic at the expense of any other sweeping changes to the U.S. healthcare market. Downstream from there, we expect the Biden administration to push for expanded coverage and prop up the Affordable Care Act through legislation and executive action.
Any substantive effort at drug-pricing reform is probably going to be a post-2021 event. Both political parties seem cognizant of the fact that we’ll be reliant on biopharmaceutical companies’ efforts around treatments and vaccines in order to move past this pandemic. Accordingly, we expect this circumstance will mitigate any pressures to enact sweeping changes to the industry.
The world has been waiting for this announcement, but it’ll have to be patient for a little longer until COVID-19 is brought under control. Clinically, the initial results are very positive for these vaccine candidates as well as other vaccines in development, and prospects for global distribution in the second half of next year look favorable.
While governments are busy battling the pandemic, healthcare reforms will likely take a back seat. We believe investors in U.S. healthcare particularly should benefit from an incoming administration that seems inclined to place the near-term priority of pandemic crisis management above long-term policy goals until at least the second half of 2021.
1 ”Moderna’s Covid Vaccine Found 94.5% Effective in Early Analysis,” Bloomberg, November 16, 2020; “Pfizer and BioNTech’s Covid-19 vaccine found to be 90% effective,” Financial Times, November 12, 2020. 2 “Pfizer and BioNTech’s vaccine poses global logistics challenge,” The Guardian, November 10, 2020.
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