• Covid-19 might eventually resemble the seasonal flu
  • A short-course regimen of daily pills could deliver better outcomes
  • Several antiviral candidates are in the offing

Several companies, including Pfizer Inc (US:PFE) and Merck & Co (US:MRK), are pushing ahead with new trials of experimental oral antiviral drugs for Covid-19. Companies have been trying to determine the likely shape of the market and the ongoing commercial opportunity if, as some health professionals believe, we will need to address Sars-like coronavirus on a seasonal basis.

The take-up rate of vaccinations has differed from country to country and there is every chance that further direct and indirect mandates will be introduced during the northern winter, but the introduction of oral antiviral drugs could represent a sea change from a therapeutic perspective.      

It may seem slightly distasteful weighing up the commercial prospects of therapies aimed at Covid-19 when people are still falling prey to the virus. But it’s worth remembering that the broader pharma/biotech sector can rejuvenate not only from a clinical perspective, but also in terms of its growth prospects.

Novel therapies, scientific breakthroughs and clinical challenges can – and have – given rise to new business opportunities. And though there is certainly a commercial imperative regarding Covid-19, outcomes have differed across the pharmaceutical industry – and are likely to differ even further as we move forward.

Has Covid-19 been good for business? Pfizer and Moderna (US:MRNA) have power over pricing, with Oxfam reporting a range of $7 (£5) to more than $30 per person for their two-dose vaccines, collectively generating estimated sales of around $33bn over the course of 2021, while Johnson & Johnson (US:JNJ) and AstraZeneca (AZN) are committed to providing their vaccines on a not-for-profit basis until the pandemic ceases.

Indeed, sales of the vaccine are set to bring in about a quarter of Pfizer’s total revenue this year, nearly outstripping the combined sales of its three best-selling drugs.

New seasonal income streams

But Dame Sarah Gilbert, one of the UK scientists behind the Oxford/AstraZeneca vaccine, reportedly said this month that viruses tend to become weaker as they spread through a population group, so Covid-19 might eventually resemble the seasonal flu in many respects.

If the virus does naturally attenuate over time, it may be possible to determine the broad scale of the resultant commercial opportunity. Research from Fortune Business Insights shows that the global influenza vaccine market is projected to grow from $6.6bn in 2021 to $10.7bn in 2028 at a compound annual growth rate (CAGR) of 7.2 per cent. To put this into context, global aspirin sales were worth around $2bn in 2019.

But the point is that because of the clinical developments linked to Operation Warp Speed – the US government-backed scheme to develop a Covid vaccine – it’s conceivable that a new predictable income stream will open up for the pharmaceutical industry, perhaps on a scale comparable with seasonal influenza vaccinations.

Remember that only a quarter of the UK population were vaccinated against flu during the 2019-20 season, but it seems probable that the take-up rate of a seasonal vaccine against coronavirus would be significantly higher, perhaps even more so if it was available to people in an easy-to-administer form.

National governments and intrastate organisations are likely to come to the table as the extent of the economic damage wrought by the lockdowns and restrictions is felt. That translates to an increased tax burden, but one that has positive implications for the pharma/biotech sector. And the catalyst could be the cost of inaction.

Research commissioned by McKinsey indicates that the economic disruption could cost more than $16tn, well in advance of the projected cost of preventing future pandemics.

The spending needed to avert, or significantly reduce, the likelihood of future pandemics would be $85bn to $130bn over the first two years and approximately $20bn to $50bn a year afterwards, equating “to an average of about $5 per person per year for the world’s population”. Naturally, the pharma/biotech industry would be one of the chief beneficiaries.

An alternative to the needle

Part of the cost burden of vaccination programmes relates to the logistical reality that healthcare professionals are needed to administer standard vaccines. Unfortunately, there are many geographies globally that have inadequate, or even non-existent, access to healthcare facilities.

And in contrast to the initial assertions by health authorities, it is becoming increasingly clear that the vaccines may well require multiple doses before individuals generate an adequate immune response. There is also a three- to four-week time lag before the vaccines take effect, so the provision of endless booster shots could be prohibitive from a cost perspective. Add in the fact that some of the existing vaccines need to be stored at very low temperatures and it amounts to a hefty financial burden for health authorities, but one that could be reduced significantly through the provision of an orally – or perhaps nasally – administered alternative.

Beyond the wider financial incentive, treatments on this basis could have additional clinical advantages. Oramed Pharmaceuticals (US:ORMP), a clinical-stage pharma group focused on the development of oral drug delivery systems, is currently advancing two primary programmes: oral insulin for diabetes and an oral Covid-19 vaccine, the latter in conjunction with its Indian partner, Premas Biotech.

Its Covid-19 vaccine, developed through a majority-owned company, Oravax Medical Inc, is set to begin clinical trials following promising preclinical studies. These will be completed initially in Israel, then in other locales across the globe. In addition, Oravax has also out-licensed specific rights to this technology to Premas Biotech to develop an injectable form of the vaccine in India where there is a pressing need for vaccines.

The Oravax vaccine consists of a virus-like particle that is virtually identical to SARS CoV-2 on the outside and targets the spike protein that allows the virus to enter human cells. But it does so with no genetic material and it cannot reproduce inside the body. What’s more, it also targets other proteins on the surface of the virus that mutate more gradually, so theoretically it could provide better protection against viral variants.

Early intercession could lead to improved clinical outcomes

Prevention is one thing, but early intercession could lead to improved clinical outcomes. Several serious viral conditions, most notably HIV/AIDS, are already being treated through novel antiviral treatments. Vaccines were initially touted as the most effective measure against Covid-19, particularly as the mRNA candidates were attacking the problem from a new perspective. But even if they were to achieve efficacy rates in line with early estimates, by no means a given, mRNA vaccines require highly advanced production facilities, which effectively reduce their scalability and potential impact on many developing and frontier economies, hence the clamour over ‘vaccine democracy’.

However, could it be that a short-course regimen of daily pills administered early after diagnosis will deliver greater benefits than standard vaccinations, by preventing the development of symptoms following exposure?

We may find out sooner rather than later. One of the leading candidates, molnupiravir, is being co-developed by Merck & Co and Ridgeback Biotherapeutics and is being tested in Phase 3 clinical trials, while others include a therapy developed by Pfizer, known as PF-07321332, and AT-527, an antiviral produced by Roche Holding AG (ROG: SIX) and Atea Pharmaceuticals (NASDAQ: AVIR).

Merck discontinued the development of its Covid-19 vaccine in the early part of the year, although it entered a partnership with Johnson & Johnson to expand manufacturing capacity of the latter group’s vaccine. More importantly, it continued the development of its own antiviral pill.

We can never predict the outcome of clinical trials, but it could be argued that Merck’s trading multiples don’t adequately reflect its short- to medium-term trading prospects, even leaving aside the clinical promise afforded by molnupiravir, not to mention an accompanying 3.5 per cent dividend yield. The group is trading at a 26 per cent discount to the average target price given by the brokers and analysts that cover the stock.

The current share price represents a lowly rating of 13 times forecast consensus earnings, falling to a multiple of 11.5 in 2022. Excess leverage may be an issue, although some would say that comes with the territory; a multiple of 2.25 times cash profits isn’t the best in class, but free cash flow increased by 37.8 per cent through 2020 and interest cover remains strong.

We can but hope on the antiviral front. If anything, the past 18 months have shown that it is unwise to make too many assumptions from a clinical perspective. By the end of the year, it’s possible we may find that the initial hype generated by the mRNA candidates was misplaced. Eventually, neither prevention, nor cure, may come to be seen as realistic options. In which case the roll-out of antiviral therapies might provide a more effective means of living with the virus.  


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