Coronavirus vaccines: top shots

Vaccines, once considered a neglected Cinderella industry, have never been so hot. On Monday, the UK’s GlaxoSmithKline paid £130m for a 10 per cent stake in German jab maker CureVac. Early stage trial data of a Covid-19 vaccine made by UK rival AstraZeneca was also in the spotlight. Last week, news of a “robust” immune response to a vaccine developed by Boston-based Moderna pushed its shares up 16 per cent. Those of Germany’s BioNTech also jumped when it received “fast track” status from US regulators a day earlier.

There are vast differences in approach. AZ is unquestionably ambitious, targeting 2bn doses. But it is not a vaccine specialist and does not expect to profit from the jabs developed at Oxford university — though success would enhance its reputation.

Moderna and BioNTech are using lab-made molecules that code for protein molecules on the virus’s surface to stimulate the body’s immune response. This messenger-RNA approach is novel. Proof of concept would boost other vaccines — targeting cancers and other diseases — in the companies’ portfolios. GSK’s collaboration with CureVac focuses on the same technology, though the German biotech’s existing Covid-19 mRNA vaccine is not part of the deal.

Chart showing the accelerated development of the Covid-19 vaccine

Pfizer, which has teamed up with BioNTech, intends vaccines to make a profit. Moderna also wants its investors, including those who took part in a $1.3bn capital raise in May, to be rewarded for the risks of producing the vaccine ahead of its approval. If successful, the payback would be substantial. At least 50m people could be vaccinated in 2021 at $50 per dose, thinks Jefferies. Moderna’s share price has quadrupled this year, though some are sceptical of hype. Short sellers have borrowed nearly 10 per cent of Moderna’s available float.

Graphic showing the stages of vaccine production

Making money from vaccines is notoriously difficult, thanks to the high risk of failure, heavy sunk costs and uncertain markets. With 170 Covid-19 vaccines under development, many also-rans will suffer irrecoverable losses. Investors should hedge their bets. It is worth backing different approaches to spread risks. Moreover, this is not a winner-takes-all market. There is a need for multiple success stories. 

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