The race for the Covid-19 vaccine is sending the stock prices of many laboratories around the world soaring, from young innovative companies stealing the show from established heavyweights in the sector.
None is yet ready to be marketed, but 168 vaccine candidates are in development, according to the WHO, many of them by these young “biotechs”.
Emblematic example, the American Moderna, which has one of the most advanced projects, with a vaccine candidate in “phase 3” of clinical trials on humans, the last before marketing: the company is valued at nearly 30 billion dollars on Wall Street, where its stock has jumped 250% since the start of the year.
The competitors are not left out: + 350% and even + 3.580% for its compatriots Inovio and Novavax, + 103% for the German BioNTech …
Others knock on the door of the Stock Exchange: the sector has thus raised more than 9 billion dollars this year during entries on Wall Street according to the firm Dealogic, it is unheard of. The German CureVac is already worth more than $ 10 billion after a thunderous debut on Friday on the US electronic exchange Nasdaq ….
By comparison, the shares of “big” laboratories like Pfizer, Sanofi or GlaxoSmithKline show less growth. But they are also worth much more, respectively 219 billion, 128 billion and 101 billion dollars.
Money is flowing freely for biotechs. But “many of them have gone beyond where they really should be,” warns Chris Redhead, financial health analyst for Goetzpartners.
“What worries me is the reaction of investors assuming a very high rate of success among these companies and the fact that each will pocket billions of dollars thanks to vaccines”, adds Daniel Mahony, fund manager in the pharmaceutical industry for the company Polar Capital in London. “It just seems improbable to me.”
In fact, sometimes positive preliminary results on a vaccine candidate are enough to see a stock price soar.
But “in a classic scenario, and a pandemic is no exception, the probabilities for a vaccine to pass safely from phase 1 (clinical trials on humans, Editor’s note) at the end of phase 3 are around 10% “, recalls Adam Barker, analyst for Shore Capital.
Many investors point out the hype and the strong speculation around biotechs. What differs this time, they argue, is the degree of involvement of governments and foundations.
As the pandemic has killed more than 770,000 people and torn the global economy to pieces, developed states are paying out hundreds of millions of dollars in grants to businesses and ordering huge amounts of potential vaccines from them.
For Moderna, for example, Christmas took place this summer: the United States invested $ 2.48 billion, between research and the advance ordering of doses.
“In normal times, a company in the pharmaceutical sector expands its production chain when it has authorizations for its vaccine, because it is very expensive. With millions of dollars on the table, it makes things simpler”, emphasizes Daniel Mahony.
By investing heavily, governments also “increase competition between small and large”, he adds, partially justifying the soaring stock market of the former.
“Big” established groups like AstraZeneca and Johnson & Johnson also want to market their potential vaccine at cost price during the crisis, which limits their progress on the stock market.
The very large sums injected into innovative companies will however make it possible to make progress on many subjects other than the coronavirus: “infectious diseases or the next generation of vaccines, for example”, underlines Chris Redhead.
Another encouraging factor: the acceleration of the pace of research.
“Traditionally, it takes 10 to 15 years to develop a new vaccine. Right now, companies are in phase 3 studies six months after the pandemic arrived in the United States,” observes Andy Acker, manager of fund and biotechnology specialist at Janus Henderson.
Nonetheless, biotechs are risky investments.
“When you buy a biotech, you buy a kind of lottery ticket”, notes Gregori Volokhine, portfolio manager for Meeschaert Financial Services in New York. “There will always be investors who try to make a big splash. The same thing happened with the internet bubble, with solar, with the electric car, and now with the Covid.”
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