Why New Coronavirus Strains Can Improve Pfizer and Moderna’s Fortunes

That was the last thing anyone wanted to hear in the waning days of 2020. Researchers have identified a new strain of the SARS-CoV-2 coronavirus that causes COVID-19. And it can be much more contagious than the current coronavirus strain that 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, it is likely that such attempts are too late.

The obvious question for many people is: Will the vaccines from Pfizer (NYSE: PFE) and Modern (NASDAQ: MRNA) already distributed in the US, is it still effective against the new tension? So far, the answer to that question seems to be ‘yes’. However, more research is being done.

While this is all understandable, there is a silver lining to some investors. This is why the coronavirus strains can increase the prosperity of Pfizer and Moderna.

Man with hands on hips looking at computer images of coronavirus and a world map with a city street in the background.

Image Source: Getty Images.

More mutations can mean bigger earnings

Americans are used to receiving vaccines. But there are some big differences in the vaccines we get.

Tetanus shots, for example, are usually given about four weeks apart. A third shot is usually given within six to twelve months later. After that, booster shots are needed every 10 years. On the other hand, a flu vaccine is an annual event.

One important reason why flu vaccines are needed so much more frequently is that the flu virus mutates rapidly. Vaccinations need to be adjusted to provide protection against the new flu strains.

Research has found that SARS-CoV-2 has a lower mutation rate than the seasonal flu. However, the coronavirus is definitely mutating as the more contagious strain identified in the UK underlines. For Pfizer, with its partner BioNTech (NASDAQ: BNTX), and Modern, these mutations can yield more money in the long run.

Bernstein analyst Ronny Gal plans a $ 40 billion COVID-19 vaccine market in 2021 that will decline significantly after next year. However, future mutations to the coronavirus may make current versions of vaccines less effective. If that happens, the market size for Pfizer and Moderna in 2022 and beyond will be much larger than Gal predicts.

The mRNA benefit

Other coronavirus vaccines may be on the way soon. AstraZeneca hoping to get UK approval for its AZD1222 this week. The British drugmaker is due to report its findings at the end of January from a major US study. Johnson & Johnson expects to seek US emergency authorization for its COVID-19 vaccine in February.

However, Pfizer and Moderna may have a significant competitive advantage due to their similar approaches. Both companies use messenger RNA (mRNA) to stimulate the body cells to produce a replica of the vein protein on the surface of SARS-CoV-2.

In part, Pfizer and Moderna were able to enter the market faster than their competitors due to the rapid development of a vaccine that enables mRNA technology. Once the genetic sequence of a virus is known, mRNA-generated antigens can be rapidly produced and tested in preclinical studies, with the best candidate advancing to clinical trials.

This rapid development and testing ability is likely to become even more important in an environment where the coronavirus has mutated frequently.

Too soon

Does the rise of the British coronavirus strain mean that Pfizer and Moderna are ready to dominate the COVID-19 vaccine market? No, it is too soon to know if other future SARS-CoV-2 mutations will make a significant financial difference for the companies.

However, it is certainly possible that new coronavirus strains could work in the way to the benefit of Pfizer and Moderna. It looks like Moderna is probably the biggest winner because it owns the full rights to its COVID vaccine, while Pfizer and BioNTech share the revenue for their vaccine.

Modern is almost 500% in 2020. The biotechnological stock can move much higher as mutations with the coronavirus make the COVID-19 vaccine market more like the seasonal flu vaccine market than the tetanus vaccine market.