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Three vaccines capable of US authorisation in 2020

Karen Andersen, CFA  |  01 Sep 2020Text size  Decrease  Increase  |  
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While strong antibody and T-cell responses in several phase 1 studies of covid-19 vaccines don't guarantee protection against infection or severe disease, we're increasingly bullish that most of the vaccines entering late-stage development in the US will meet Food and Drug Administration guidelines for approval (50 per cent risk reduction).

We expect the FDA could award three emergency use authorisations, or EUAs, for use in high-risk individuals before the end of the year for Moderna, Pfizer/BioNTech, and AstraZeneca/Oxford, based on interim efficacy data from phase 3 studies.

We expect most US adults will be vaccinated in the first half of 2021. The rapid progress with these vaccine programs is a testament to the innovation and clinical trial expertise at wide-moat firms such as Pfizer and AstraZeneca and the positive moat trend at RNA vaccine firm BioNTech.

Beyond vaccines, we still model significant sales for Gilead's Veklury (anti-viral treatment) and Roche and Regeneron's REGN-COV2 (treatment and prevention antibody), but we also expect these sales to rapidly decline following 2021.

We estimate a US$40 billion ($54 billion) global covid-19 vaccine market in 2021, particularly as the next set of vaccines (from firms including J&J, Novavax, and Sanofi) could reach the market next year and help satisfy demand globally.

That said, we expect minimal vaccine profit from not-for-profit strategies at AstraZeneca and Johnson & Johnson, and minimal long-term valuation impact for Big Pharma in general (despite including US$10 billion in 2021 sales in our valuation models for Pfizer/BioNTech's BNT162b2).

This is largely due to the fact that we don't model recurring sales for these vaccines beyond this pandemic. More data on duration of protection from vaccines, relative efficacy of vaccines in trials, number of successful candidates, pricing strategies, and evolution of the virus could push us to eventually include long-term coronavirus vaccine sales in our models.

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Beyond vaccines, we also see a significant, albeit mostly near-term, opportunity. We see targeted antibody programs like Regeneron/Roche's REGN-COV2 cocktail as a powerful way to treat or prevent covid-19 in immune compromised or elderly populations.

We model US$6 billion in sales in 2021 (60 per cent probability of approval) and also see promise in AstraZeneca and Lilly programs.

We now model peak sales for Gilead's Veklury of nearly US$3 billion in 2020, as we expect vaccine and antibody progress and potential competition from oral treatments to weigh on sales starting next year.

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is a healthcare strategist for Morningstar.

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