Pfizer/BioNTech Covid vaccine is quietly exciting

Healthcare companies, Pfizer and BioNTech, published early findings on their Covid-19 vaccine, currently in trials, to widespread excitement. The news electrified equity markets sending indices to new intraday highs and sparking a rotation into cyclical and value stocks. We think the excitement is justified but there are challenges ahead, particularly around data and distribution. If there is further good news, potentially from Moderna currently conducting its own vaccine trial, then the rotation could be more lasting.

By Toby Gibb
Global Head of Investment Directing, Equities

Jubilant markets rotate into ‘re-opening’ stocks

Investors are getting excited about Pfizer and BioNTech’s interim update (9 November) on the phase III study of its Covid-19 vaccine candidate. The news led to huge rotations in equities, with capital flying out of ‘stay-at-home’ stocks and into ‘re-opening’ stocks as investors bet on an end in sight to the Covid-related mobility restrictions.

Monday 9 November was one of the busiest days of the year for most trading desks. US$3.3 billion was traded in North America alone, with cyclical and value stocks in demand - energy leapt 18% - while growth stocks sold off. A number of indices reached intraday all-time highs but the divergence between the S&P 500 and NASDAQ was particularly instructive, with the former closing up 1.2% while the latter fell 1.5%. The NASDAQ is dominated by tech stocks, which have benefitted from lockdowns, while the S&P 500 is a much more inclusive index exposed to the broad economy.

Is the fuss worth getting excited about? In short, yes, but there are a number of challenges to overcome.


A novel vaccine technology

Pfizer and BioNTech’s vaccine candidate is currently two months into a six month phase III trial where the drug is tested on participants to assess its efficacy (performance under controlled conditions), effectiveness (performance in real-world conditions) and safety (side effects). The vaccine requires two doses; the second is administered three weeks after the first and efficacy is measured seven later (28 days after the initial dose).

The early results indicate the vaccine has a 90% efficacy rate, well above the 60-70% expected. Given that over 43,000 patients globally are in the trial and there no serious safety concerns to date, the results are encouraging.


Vaccine’s efficacy beats expectations

Responses to the question: What will Covid-19 vaccine efficacy be?

Source: Wolfe Research, 9 November 2020.


The vaccine candidate, identified as BNT162b2, uses a novel approach. Usually, vaccines work by delivering a weakened form of a virus into the body so the immune system can build up antibodies to fight infection. This drug works by harnessing the function of mRNA.

MRNA (the ‘m’ stands for messenger) is responsible for carrying information from DNA to other cells that produce proteins. BNT162b2 works by sending a message to cells to make a Covid-19 protein, which in turn triggers the body’s immune system to create antibodies against it.

If this drug is successful it would the first of this type of vaccine to be commercialised and would not only address Covid-19 but would boost the field of mRNA medical research. However, there are obstacles ahead around the data and any potential distribution of the drug.


Data and distribution challenges

The figures released by Pfizer and BioNTech are headline numbers, not complete findings. We want to be able to analyse the full data set and are particularly interested in the vaccine’s effectiveness for the elderly and other high-risk groups. We also want readings beyond the 28-day endpoint. The current figures do not say anything about the long-term duration of the vaccine, making it hard to quantify its true protection.

Distribution of this vaccine, if it gets to that stage, will be difficult. The treatment requires two doses and must be transported at -70c. To ship millions of vials of the vaccine at such a cool temperature is going to be costly, logistically complicated and time consuming.


The next steps

Pfizer and BioNTech need two months of safety data after the second dose before they can apply for emergency use authorisation (EUA), which should be in the second half of November. If they receive it from the US Food and Drug Administration (FDA), they will be allowed to produce vaccines for 30 million Americans at higher risk. Full FDA approval requires six months of safety data, which would be available in early 2021. It’s unclear how authorities in other countries might deal with the approval process.

The companies expect to be able to produce 50 million doses of the vaccine by the end of this year, covering 25 million people, and 1.3 billion doses in 2021.

BNT162b2 is not the only vaccine being trialled. There are 10 programmes currently in phase III, with US biotech Moderna’s candidate most promising. Moderna also uses mRNA technology and it can file for EUA after 25 November. The findings from the Pfizer and BioNTech study potentially raise expectations for Moderna’s trial.


Vaccine in the medium term is possible

Overall, the interim results on the phase III process are positive. Although we cannot categorically say if Pfizer and BioNTech’s vaccine will eventually see mass roll out, it makes us more confident that a vaccine available for wide distribution in the medium term is achievable.

Any further progress on vaccines could boost equity markets, particularly by providing more fuel for the rotation towards cyclical stocks that we have seen early this week. With that in mind, Moderna’s vaccine update expected later this month is one to keep a close eye on.