Vaccine Stocks Still Have Hidden Opportunities

 

Don't be afraid of thunderstorms, vaccine stocks still have hidden opportunities

In 2021, which is shrouded in the shadow of the new coronavirus, what product is most anticipated?

Of course it is the new crown vaccine.

 

People friends may feel that they are not strong yet. There is a friend in Junlin who is in Russia. Every day he wonders when he can get vaccinated quickly, and then return to China as soon as possible to reunite with his family, and then live a life of free eating hot pot and skewers...

 

Now it seems that the day is coming soon.

 

On December 2, the United Kingdom approved the new crown vaccine BNT162b2 jointly developed by Pfizer and BioNtech, becoming the first country in the world to approve the vaccine!

 

The first batch of vaccines is expected to start on December 8.

 

According to BBC News, the first batch of new crown vaccines have been shipped to major medical institutions and are ready to be put into use. This will be a marathon. In the future, several batches of vaccines will arrive in the UK.

 

Naturally, no country has fallen.

Also Refer: Vaccine Development Encyclopedia 

Investigation on the preparations for the development and production of the new coronavirus vaccine in Beijing

On December 2, Vice Premier Sun Chunlan investigated the preparations for the development and production of the new coronavirus vaccine in Beijing, and required preparations for large-scale production on the premise of ensuring that the vaccine is safe and effective.

Vaccines Stocks in market

 

On December 4, Wang Junzhi, an academician of the Chinese Academy of Engineering, said in his speech on "New Coronary Pneumonia Vaccine and Drug Development Progress" at the Eighth World Conference on Integrated Traditional Chinese and Western Medicine,

 

"Regarding vaccines, big news will be announced in the next one to two weeks." "600 million inactivated vaccines will be approved for marketing within this year."

 

Affected by these good news, vaccine stocks have begun to reverse sharply in the past two days.

 

Last Thursday, the three major vaccine giants Zhifei Biological, Kangtai Biological, and Watson Biological all increased by more than 4%.

 

Will the declining vaccine stocks finally usher in a reversal?

1. To say that the industry with the highest certainty of new demand is vaccines, but how big is this demand?

 

This goes back to herd immunity.

 

Is it related to herd immunity?

It is true that in the past period of time, herd immunity has almost become the object of ridicule by the Chinese people, but this method is the ultimate solution to stop the spread of the new crown epidemic.

 

Immune protection can be divided into individual immunity and herd immunity. Individual immunity is well understood. 

After vaccination, there is individual immunity, but individual immunity can only protect itself.

 

According to the self-insurance mentality, in order to achieve global epidemic control, almost everyone must be vaccinated. This is not realistic and unnecessary.

 

Because after the number of immunized individuals reaches a certain level, indirect protection can also be formed for those who are not immunized-the immune group is like a wall, protecting those who are not immunized, so that this part can also avoid the worry of being infected .

How big is the proportion of immunized groups to achieve this goal?

According to the current clinical data, it is assumed that an average new crown patient will infect 2.5 people, and the protection rate of the vaccine is 90%. 

For ordinary people to obtain long-term immunity after vaccination, 66.7% of people need to receive the new crown vaccine to achieve herd immunity. .

 

Calculating the demand simply, the global population in 2019 is about 7.674 billion, 66.7% of them will be vaccinated, and most of the current vaccines require 2 shots, and the corresponding demand can be 10.2 billion doses, which can be said to be an astronomical number .

 

Taking into account the differences in the epidemic prevention and control policies and prevention and control effects of various countries, it is almost difficult to vaccinate the new crown for 5.1 billion people around the world. Therefore, it is a more feasible method to give different strategies according to the current situation of the epidemic situation in various regions.

 

Roughly speaking, a large-scale vaccination is carried out at a rate of 66.7% in areas where the virus is spreading;

 

Part of the vaccination was carried out in areas with clusters of cases and sporadic cases, while in other areas, only frontline personnel were vaccinated.

 

Based on this very conservative distribution, approximately 4.5 billion doses of vaccine are needed globally.

 

According to the previous analysis, in the case of lifelong immunity after vaccination, 4.5-10 billion doses of vaccine are needed globally.

 

Considering that the virus is still mutating and the possibility of lifelong immunity after vaccination is very small, if the vaccine protection time is short (for example, within 1 year), the overall demand will be several times the previous estimate, and the market space may be beyond imagination.

 

Looking back at the country, we will rank the Chinese population according to the four points of whether they are in direct contact with the source of the virus, whether they live in a group, whether there are many occupational contacts, and whether they are at risk of serious illness. 

The following priority groups can be obtained. The number of people in demand is approximately 297 million:

 

Nearly 300 million people are recommended to be vaccinated. Assuming that each person needs 2 doses and can have life-long immunity after vaccination, 600 million doses of vaccine are needed. 

If the vaccine protection time is limited, the number of vaccines required will increase significantly.

 

Therefore, the demand for the new crown vaccine is worth looking forward to.

2. After talking about demand, what about supply?

At present, there are 12 vaccines in clinical phase 3, and there are 5 vaccines in China. They are:

 

Inactivated vaccine from Wuhan Institute of Biology, a subsidiary of Sinopharm Group; Inactivated vaccine from Beijing Institute of Biology, a subsidiary of Sinopharm Group.

Adenovirus vector vaccine developed by the Chinese Academy of Military Sciences and Kangsino Company.

Recombinant protein from Anhui Zhifeilongkema Biopharmaceutical Co., Ltd. Subunit vaccine.

Inactivated vaccine of Beijing Kexing Zhongwei Biotechnology Co., Ltd.

It can be found that five institutions in my country have chosen 3 technical routes: inactivated vaccines, adenovirus vector vaccines, and recombinant protein subunit vaccines. The choice of technical routes will affect production and cost:

 

The technical route of inactivated vaccines is mature and can be put into use quickly. The two vaccines currently on the market also follow this route, but its preparation process is more complicated, the cost is high and the output is average, and the market price is 200-300 yuan/dose.

 

It can be used as an emergency, but it is difficult to vaccinate on a large scale.

 

Adenovirus vector vaccines need to be prepared by culturing adenovirus, so the preparation process is more complicated, and the speed of mass production is relatively slow, but it generally only needs one injection, which has a cost advantage over inactivated vaccines.

 

At present, Cansino's products are mainly used by the military. In addition, it has received orders from Mexico, and its domestic vaccine supply capacity may be limited.

 

Recombinant protein subunit vaccines are generally prepared in large quantities by microbial fermentation, with high yield and low cost. Compared with the former two, the cost and price advantages are more obvious. 

For the time being, it is the route with the greatest potential. The corresponding company is Zhifei Bio.

 

In addition to self-developed and self-produced vaccines in China, cooperation with overseas institutions for development and production is also a feasible way.

 

Currently leading the way are Kangtai Bio (cooperating with AstraZeneca) and Fosun Pharma (cooperating with BioNTech). The vaccine of the latter has been approved for overseas marketing.

 

The vaccine cooperating with AstraZeneca takes the adenovirus vector route, and its effectiveness is 70%, which is lower than the mRNA vaccine cooperating with BioNTech (its effectiveness is as high as 95%), and the latter is less difficult and costly to prepare.

 

Therefore, if both vaccines are approved for marketing, the latter will be more competitive.

 

In conclusion:

The cost and preparation difficulty are ranked from low to high: mRNA<recombinant protein subunit<adenovirus vector<inactivated vaccine.

 

 

Among the domestic companies that have entered the third phase of clinical trials, Zhifei has the greatest potential;

Among companies cooperating with overseas institutions, Fosun Pharma is more competitive.

 

In addition to the technical route, production capacity is also an important part. Without sufficient production capacity, no matter how good the product is, no profit can be brought.

 

According to the State Council's joint prevention and control mechanism, it is estimated that by the end of this year, my country's new crown vaccine production capacity will reach 610 million doses, and the production capacity is expected to exceed 2 billion by the end of next year.

 

Among them, the two new crown vaccine production workshops of Zhongsheng Group have been completed, and the production capacity will reach 1 billion doses next year.

 

The annual production capacity of Beijing Kexing can reach 300 million doses; the planned production capacity of Cansino is 120 million doses; the annual production capacity of Zhifei Biology is 300 million doses.

 

The designed capacity of the vaccine renovation plant jointly developed by Kangtai Biotechnology and AstraZeneca is 400 million doses, and the capacity of the self-developed inactivated vaccine is estimated to be 200-300 million doses.

Knowing the technical route and production capacity, what about the cost and price of the vaccine?

 

Looking at the cost first, for vaccine companies, costs can be divided into three categories: research and development costs, capacity construction costs, and production costs.

 

The bulk of the R&D cost is estimated to be around US$150-200 million for overseas Phase III clinical research, and for companies with better cost management, it is estimated to be around RMB 1 billion.

 

The capacity construction is quite different:

The total investment of the Piowangxin emergency project (inactivated vaccine) invested by Kangtai Biotechnology is about 1 billion yuan, with an average cost of 3-4 yuan per dose, while the construction cost of the adenovirus vector vaccine cooperating with AstraZeneca is 400 million yuan. On average 1 yuan per dose.

 

Zhifei Biotechnology produces the new crown vaccine by transforming the workshop and expanding the production license, and its cost is lower.

 

The production cost also varies greatly. According to the different technical routes, the cost of each dose is estimated to be between 5-20 yuan.

 

Take Zhifei Biology as an example. If its R&D investment is 1 billion, the cost of capacity transformation is 50 million, and the production cost per dose is 10 yuan, regardless of sales and management expenses, in the case of full production and full sales, the purchase price is higher than 13.5 yuan. The previous cost can be recovered.

 

For the time being, overseas vaccine manufacturers’ quotations are relatively cheap, of which AstraZeneca’s quotation is only 2.5 euros (approximately 20 yuan), which is comparable to Kexing Bio’s 200-300 yuan price, and the domestic vaccines that have been on the market are competitive It can be said to be very low.

At present, developed countries have basically locked the production capacity of overseas vaccine companies, and the needs of developing countries are difficult to meet in the short term.

 

If my country develops assistance to other developing countries, it will most likely choose lower-cost vaccine solutions, such as adenovirus vector vaccines, recombinant protein subunits, and mRNA vaccines.

 

The possibility of large-scale assistance for inactivated vaccines is unlikely.

 

In the short term, CanSino's adenovirus vector vaccine is more competitive if it is aided or exported abroad, and Zhifei is the closest to successful research and development in other routes.

 

To sum up, only looking at the new crown vaccine product. Among the domestic institutions that have entered the third phase of clinical trials, Cansino and Zhifei Bio are the most competitive. 

Other institutions need to wait for further research and development or obtain marketing approval before evaluating.

  

3. Although many people suspect that the new crown virus may become a flu-like existence and will continue to accompany humans in the future, before this day comes, Kingland still hopes that humans can completely eliminate the new crown virus.

Of course, this also means that the demand for the new crown vaccine cannot be sustained. So in the medium and long term, which of the three domestic vaccine giants (Zhifei, Watson, Kangtai) is stronger?

 

For the three companies, the most important thing is the R&D pipeline and R&D investment.

 

First look at the R&D pipeline:

 

Two products of Zhifei Bio have completed Phase III clinical trials, and 4 products are or will enter Phase III clinical trials.

 Kangtai Biosciences has 4 products that enter the new drug application link, 3 products have completed phase III clinical trials, and one product is about to enter phase III clinical trials. In terms of quantity, the advantages are very obvious.

 

Watson Biotech's only product in Phase III clinical trials is HPV bivalent vaccine. Because HPV vaccine is a self-financed, consumer-upgraded vaccine, consumers prefer higher-priced (4 or 9-valent) vaccines, so the product's future market potential relatively low.

 

The current blockbuster vaccine products mainly include high-priced HPV vaccine, pneumococcal polysaccharide conjugate vaccine, quadrivalent influenza vaccine, third-generation rabies vaccine, and quadrivalent meningococcal conjugate vaccine, which are estimated according to the development stage:

 

In 2021, Kangtai Bio will have a 13-valent pneumonia vaccine and a third-generation rabies vaccine on the market;

 

In 2022, Zhifei will have three generations of rabies vaccines on the market, and Kangtai will have a tetravalent meningococcal vaccine on the market.

 

Through comparison, it can be found that Kangtai Bio's R&D pipeline is the strongest in terms of absolute number and the number of heavy products.

 

Look at R&D investment again.

 

Watson Bio's R&D investment and capitalization ratio are both high, but in fact, the number of R&D personnel and R&D investment are on a downward trend in 2017-2019. It can be said that all resources are bet on the 13-valent pneumonia vaccine on.

 

The product did sell well in the first three quarters of this year, with Q3 net profit increasing by 10 times, but this choice also limits the potential for future development.

 

The R&D investment of Kangtai Biology and Zhifei Biology is on the upward trend in 2017-2019. Both of them attach great importance to the research and development of new products. From the perspective of the proportion of R&D personnel and the proportion of R&D investment, Kangtai Biology pays more attention to R&D.

 

Taking into account that Zhifei Biology has an agent for Merck's vaccine products, it has enlarged the number of sales staff and the scale of revenue, so here is a recalculation:

 

After excluding sales personnel, the proportion of R&D personnel of Kangtai Bio and Zhifei Bio will be 22.26% and 29.05% respectively in 2019;

 

After excluding the revenue from the sales of Zhifei biological products, the research and development investment of Kangtai biological and Zhifei biological accounted for 11.09% and 19.37% respectively in 2019.

 

After adjustment, Zhifei Biotech's actual R&D investment is stronger.

 

In the long run, the concentration of my country's vaccine industry will inevitably increase. In the field of self-funded second-class vaccines, the trend of consumption upgrades is becoming more and more obvious. This requires companies to continuously invest in research and development, and sales capabilities will also become part of their competitiveness.

 

Therefore, in the long run, Zhifei Bio may be a better choice.

 

However, it needs to be reminded that nearly 90% of Zhifei's income is obtained through the agency of Merck’s products. These agency agreements will expire in 2021, and whether the contract can be renewed at that time is a sword hanging on the head.

 

If the contract can be renewed, the income of the agency products will be a strong driving force for Zhifei Bio's independent research and development. If not, the current valuation is still too high.

Finally, let me talk about Watson Bio's sale of Zerun Bio. The company's reasons are high-sounding, but this approach is indeed unfair, and it is suspected of giving up the company's long-term development potential for short-term equity incentives. 

It is inevitable to be subject to investor complaints and supervision. The floor also sent a letter to inquire about the situation.

 

The management estimated that they did not expect such a big battle. They admitted that they would not sell it this morning. Although the company's assets have not changed, the score in the hearts of investors has been lowered. Today's sharp drop also illustrates the attitude of the market.

 

This is a good thing. Investors are no longer the recipients of management’s decision-making. They participate more deeply and express their attitudes with funds. In this way, the atmosphere in the capital market will be better and the stock market is more likely to grow.