It was the last thing anyone wanted to hear in the last days of 2020. The researchers identified a new strain of the SARS-CoV-2 coronavirus that causes COVID-19. And it can be much more contagious than the current strain of coronavirus, which has wreaked havoc worldwide.
European countries have implemented travel restrictions to try to prevent the spread of the new coronavirus strain, which scientists call B.1.1.7. However, these efforts are likely to be too late.
The obvious question on many people’s minds is: Do vaccines for Pfizer (NYSE: PFE) and Modern (NASDAQ: MRNA) that are already being distributed in the USA are still effective against the new strain? So far, the answer to that question seems to be “yes”. However, more research is being carried out.
While all of this is understandably worrying, there is a silver lining for some investors. This is where the coronavirus strains can really increase the fortunes of Pfizer and Moderna.
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More mutations can mean bigger gains
Americans are used to receiving vaccines. But there are some big differences in the vaccines that we receive.
For example, tetanus vaccines are usually given four weeks apart. A third injection is usually given six to 12 months later. Thereafter, booster doses are required every 10 years. The flu vaccine, on the other hand, is an annual event.
One of the main reasons why flu vaccines are required much more often is that the flu virus mutates rapidly. Vaccines should be adjusted to provide protection against new strains of influenza.
The research found that SARS-CoV-2 has a lower mutation rate than seasonal flu. However, the coronavirus is definitely changing, as the most contagious strain identified in the UK points out. For Pfizer, together with its partner BioNTech (NASDAQ: BNTX)and Modern, these mutations can generate more money in the long run.
Ronny Gal, an analyst at Bernstein, projects a $ 40 billion COVID-19 vaccine market in 2021, which will decline significantly after next year. However, future mutations in the coronavirus may make current versions of vaccines less effective. If that happens, the size of the Pfizer and Moderna market will be much larger by 2022 and beyond what Gal is predicting.
The mRNA advantage
Other coronavirus vaccines may be on the way soon. AstraZeneca expects to obtain UK authorization for AZD1222 this week. The British drugmaker is due to release its results from a major study in the United States in late January. Johnson & Johnson expects to apply for US emergency use authorization for its COVID-19 vaccine in February.
However, Pfizer and Moderna may have an important competitive advantage due to their similar approaches. Both companies use messenger RNA (mRNA) to stimulate cells in the body to produce a replica of the spike protein that is on the surface of SARS-CoV-2.
Pfizer and Moderna managed to reach the market faster than their rivals, in part due to the rapid development of a vaccine that mRNA technology makes possible. Once the genetic sequence of a virus is known, antigens generated by mRNA can be quickly produced and tested in preclinical studies with the best candidate moving forward to clinical testing.
This rapid development and testing capacity would likely become even more important in an environment where the coronavirus mutates frequently.
Too early
Does the emergence of the UK coronavirus strain mean that Pfizer and Moderna are positioned to dominate the COVID-19 vaccine market? No. By the way, it is too early to know whether other future SARS-CoV-2 mutations will make a material financial difference for companies.
However, it is definitely possible that new strains of coronavirus could work for the benefit of Pfizer and Moderna in the future. Moderna appears to be the biggest winner, as it owns all the rights to its COVID vaccine, while Pfizer and BioNTech share the revenue from their vaccine.
Moderna is close to 500% in 2020. The biotechnology stock could rise much more if mutations with the coronavirus make the COVID-19 vaccine market more like the seasonal flu vaccine market than the vaccine market against tetanus.