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There is a ‘ridiculous amount of speculation’ over coronavirus vaccine stocks: biotech analyst

Zack Guzman
·Senior Writer

The U.S. government made yet another giant bet Wednesday on a promising coronavirus vaccine candidate from biotech giant Pfizer (PFE) and its partner BioNtech (BNTX) scoring a collective $1.95 billion for their efforts.

The new contract from the U.S. Department of Health and Human Services and the Defense Department sets the companies up to deliver 100 million doses should their candidate prove successful enough to win approval. The companies behind the candidate have already published promising results that have shown effective immune responses being built up by patients receiving the candidate under trial.

That said, the next step — a late-stage trial involving 30,000 patients planned for later this month — becomes quite crucial to see if it can meet the efficacy threshold set by the U.S. Food & Drug Administration, which requires more than half of patients to show proper immune responses to the virus. So far, investors have been piling into the leading biotech companies with each new wave of positive data. That’s led to speculation moving ahead of where the actual progress is at the moment, according to Jefferies health care equity strategist Jared Holz.

“My view is there's been a ridiculous amount of speculation around the success of these trials and the bets I believe are going to be a little more difficult with the success of the stock valuations year-to-date,” he told Yahoo Finance.

Dubbed "Operation Warp Speed," the Trump administration announced in May plans for an all-out effort to produce and distribute a coronavirus vaccine by the end of 2020. (Photo by Drew Angerer/Getty Images)
Dubbed "Operation Warp Speed," the Trump administration announced in May plans for an all-out effort to produce and distribute a coronavirus vaccine by the end of 2020. (Photo by Drew Angerer/Getty Images)

So far this year, Pfizer shares are about flat, but its smaller partner BioNtech has seen shares surge some 170%. Novavax (NVAX), which also won its own $1.6 billion government contract to continue work on its own vaccine candidate earlier this year, has seen shares advance an astounding 3,161% since the beginning of the year despite the fact that the Maryland company has never successfully brought a vaccine to market.

“I think most of the stocks have gotten their fair credit or their fair share of the credit for successful vaccine development and commercialization,” Holz said. “So from here on out it's really going to come down to who has the best data, whether investors are looking at this as a winner take all market, whether it's going to be seen as multiple winners can participate.”

That question looms large as the main vaccine contenders in Pfizer and BioNtech, Novavax, Moderna (MRNA), and AstraZeneca (AZN), which received $1.2 billion in government funding for potentially 300 million doses of its vaccine candidate its working on with University of Oxford researchers, sprint into late-stage trials.

“When you look at the amount of vaccine support that’s been given to the companies as we were discussing before from a dollar standpoint, and then look at how many patients can be treated with that, we've already sort of come up with a sum that equals the amount of the American population,” Holz calculates. “So I'm just not sure what the upside is. We've been saying for weeks now the stocks are trading much more on the narrative than they are on actual valuation.”

That said, Holz is standing by his call that at least one vaccine candidate will prove effective and ultimately win approval to be distributed to the public by the election in November. Getting there first could justify some of the outsized moves in the space so far, but Holz believe investors are completely underweighting the idea that the chosen vaccine could be notably less effective than earlier trials are suggesting.

“They're all very risky. We really haven't seen any real-life evidence that any of the vaccine programs work against the virus itself,” he said. “We have no idea in a real-world, Phase 3 setting with 30,000 patients in each trial, at least, how these vaccines are going to work.”

Zack Guzman is the host of YFi PM as well as a senior writer and on-air reporter covering entrepreneurship, cannabis, startups, and breaking news at Yahoo Finance. Follow him on Twitter @zGuz.

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