Are We There Yet? - The Average Joe

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    Are We There Yet?

    victorlei

    July 23, 2020

    We’re close… ish… not really. Several COVID vaccine developers are beginning the last testing phase before being reviewed for final approval. This phase could last anywhere between 3-6 months. 

    • 160 vaccines are in development and 26 are in the human testing phase.
    • AstraZeneca ($AZN) has already begun phase 3 and Moderna ($MRNA) and Johnson & Johnson ($JNJ) is expected to begin phase 3 at the end of July.

    THE EXPLANATION

    Leading the pack is a partnership between the University of Oxford and UK-based AstraZeneca. They are predicting the delivery of its first emergency doses as early as October 2020. But don’t hold your breath. Best case scenario, wide access to vaccinations are not expected to reach the market until mid-2021.

    Even before a successful vaccine is developed, countries are hedging their bets by making vaccine purchasing deals with multiple pharmaceutical companies. To secure 300m doses of AstraZeneca’s first billion doses, the US contributed $1.2b to the development of the vaccine in May.

    • As of July 21, the US has granted billions of dollars into four drug developers: AstraZeneca, Moderna, Johnson & Johnson, and Novavax.

    Market analysts are raising concerns on profitability and overvaluation of these pharmaceutical companies.

    • Traditionally, holding a patent and charging outrageously high prices is a common practice in the pharma industry. Political pressure may prevent pharmaceutical companies from overcharging for vaccines.
    • The final cost of developing the drug is still unknown and analysts are worried that drug makers will not be able to recoup their initial investment.
    • On July 20, JP Morgan downgraded Moderna on concerns of its stock being overvalued.

    THE ACTION

    The industries that were hit the hardest from shutdowns stand to benefit the most from a vaccine: travel & tourism, retail, restaurant, financial stocks, etc. We’re still in the early stages and additional outbreaks could also negatively impact these sectors.

    Don’t rush into investments based solely on positive trial results. Drugmakers could run into complications at any part of the process which could delay a vaccine and negatively impact stock prices.

    Pro Tip: Being early in investing is the same as being wrong. Holding on to investments that aren’t generating a return is an opportunity cost – the loss of a potential gain in an alternative investment.

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