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How COVID-19 transformed the biotech industry

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Moderna shares surge after U.S. regulators put a pause on the use of Johnson & Johnson's COVID-19 vaccine. Hartaj Singh, Oppenheimer Analyst joins Yahoo Finance Live to weigh in on the outlook for the biotech industry.

Video Transcript

BRIAN SOZZI: The biotech space is in the spotlight today after the FDA called for an immediate pause in the use of J&J's single dose COVID-19 vaccine. The decision comes after six recipients in the US developed a rare disorder involving blood clots within two weeks of vaccination, according to the FDA. Hartaj Singh is a managing director and senior research analyst covering biotechs at Oppenheimer. Hartaj, good to see you.

Now we're getting some breaking news from that FDA audio conference right now. The FDA saying J&J vaccine very-- the risk is very low for those who got it, who got that vaccine a month ago, and but also warning that people who got the J&J vaccine recently should watch out for symptoms. Now this morning, we're seeing Moderna shares up about 7% on the news. What does this news exactly mean for Moderna?

HARTAJ SINGH: Yeah, so, you know, two separate issues there, Brian, in that question. One is the J&J news. Look, these are extremely rare events. I don't mean to be flippant, but, you know, the example I give is I live in New York City. You know, if you're jaywalking in New York City, the chance of getting hit by a car are still actually fairly small for all the millions of people that jaywalk, you know, every day. That's still actually a higher probability than getting this rare event by J&J. So, you know, if you're comfortable jaywalking in New York City, you probably should be comfortable getting this vaccine. Again, I'm not trying to be flippant, but just to give kind of perspective.

I think in terms of Moderna, look, we've always been saying that Moderna-- we don't cover Pfizer or BioNTech, but the mRNA vaccines have the best product profile in terms of what's called risk and benefit. And the J&J news just tends to highlight, again, that Moderna has that best risk benefit profile out there still, which is why the stock is positive today because we expect a long tail to the sales of their COVID-19 franchise-- vaccine franchise.

MYLES UDLAND: Yeah, and, you know, hard times. I mean, obviously, there's been a huge run in Moderna shares over the last year as they've built up this platform, this product, and it's now come to market and is being distributed widely. I guess, as an analyst, as you think through the future for Moderna here, at what point does this initial rollout of vaccines with massive subsidies from the government, making sure everybody can get one, at what point do you start to think about how the mRNA platform could either factor into COVID boosters going forward over the coming years or just different treatments? And certainly, Moderna has and other companies have many underway on top of that mRNA platform that's been so successful to [INAUDIBLE] COVID.

HARTAJ SINGH: Yeah, I mean, Myles, look, you know, the closest example we've ever given for Moderna since its IPO is essentially Genentech, you know, before it was acquired by Roche. They came up with antibodies. The overall sales of antibodies worldwide now are $150 billion plus, of which I believe Genentech has about 10% to 15% of those sales. This is the next closest thing with mRNA. And Moderna is the clear leader, just like Genentech was. And so, 10, 20, 30 years from now, we'll have multiple billions of dollars worth of sales from vaccines and other areas of which Moderna should have a fairly significant market share.

In terms specifically of what they'll be able to roll out, we'll start knowing it by tomorrow. You know, the R&D day for Moderna and other areas that they're interested in, you know, other infectious disease areas in cancer, in rare diseases, where basically replacing a deficient protein in a human being can lead to hopefully fixing that disease. So we should start seeing that tomorrow. And then throughout this year, in terms of sales of the COVID-19 franchise, I think that 2022 and 2023 sales and what those could be, we'll really start seeing the contours of that in the second and the third quarter earnings call, as we start seeing those next year's worth of back-seat contracts.

BRIAN SOZZI: And Hartaj, you also cover Gilead, and Gilead coming out and saying that they have stopped their late stage study of a COVID-19 treatment, what does that mean to the stock?

HARTAJ SINGH: Look, you know, the heavyweight, the 800-pound gorillas in vaccine development have been, for a long time, Merck and Sanofi and GSK. AstraZeneca and J&J were never really big heavyweights, right, in vaccine development by sales. So they are the two that used old platforms to bring drugs to market. And it was done very quickly. And we're seeing a little bit of maybe what's called the side effects of that, right? Merck and Sanofi and GSK probably took a step back, saying this is going to be difficult.

Same thing with Gilead right now, right? This is a very new virus. It's new to human beings. Our immune systems are still adjusting to it. We're gathering a lot of data to try to figure out how to tackle this virus vigorously. And in that interim, there will be some failures. There will be companies that will have to step back. Even our bellwether names in drug development will step back from time to time. Overall, I still expect us to be able to handle this virus, you know, in the next one to three years.

MYLES UDLAND: And Hartaj, I know we've talked about this before. But as you think about just your general [INAUDIBLE] and the kinds of incoming that you are getting from clients who are either newly involved or are thinking about getting involved, thinking about their investment process just around the biotech space in general, how has it changed, if at all, through this COVID period? And are there any new kind of habits and new frameworks that investors are thinking about in this space, as we move past the pandemic?

HARTAJ SINGH: Yeah, so Myles, again, there's two aspects to that question. One is the very positive bounce and reviews that biotech last year for helping tackle COVID-19. I think as investors start feeling that the economy is opening up, they've sort of sold biotech a little bit in the summer of last year and then early this year. There's also a drug pricing conundrum to this, which is that Washington, DC, with the Democrats in power, that there's a belief that drug pricing legislation of some sort will come through, which has been an overhang on biopharma in general.

You know, biotech has higher value products than pharma, so it should suffer less from this pricing. But those are the two areas that's been a little bit of an overhang. I think those are starting to probably ameliorate the summer. I think clients understand that biotech is a good hedge if the economy opening doesn't go as smoothly as we're hoping it will. And then number two, as we see the contours of drug pricing legislation come out the next month or two from the Bernie Sanders side of the Democratic party, we'll start understanding that it mostly hits companies with older drugs that are [INAUDIBLE] prices potentially unnecessarily versus more innovative companies like a Moderna or a Gilead and others.

BRIAN SOZZI: Hartaj Singh, managing director and senior research analyst over at Oppenheimer, good to see you as always.