Shares in the US Covid vaccine developer Moderna – the second largest holding for giant Swiss investment company BB Biotech – fell by 6% yesterday, after the Biden Administration said it would support an exceptional waiver of IP protection on COVID-19 vaccines for developing countries through the World Trade Organisation.
Moderna accounted for 7.8% of BB Biotech’s portfolio value as of 31 March and has been its top performing stock since the start of the pandemic in 2020. Even after yesterday’s fall, the stock is up 55% year to date and by 230% over the past year on the back of successful commercialisation of the Covid vaccine and the extension of its work into other disease areas. BB Biotech stock (SW: BION) opened 1% lower this morning at CHF80.50/share, with the NAV/share at close yesterday 2% lower at CHF66.4/share.
Pressure has been growing on Western governments to support the suspension of IP on COVID-19 vaccines for developing world manufacturers, especially following the recent explosion of coronavirus cases in India. Some 60 developing countries, led by India and South Africa, are drafting a proposal to waive WTO IP protection rules.
Advocates of such a suspension claim it would enable generic companies in developing countries to produce Covid vaccines, but opponents argue that global vaccine supply is in fact constrained by many other factors including shortages of components in the supply chain. Many pharma industry experts argue that the manufacturing of complex biologicals such as mRNA in lipid nanoparticles and adenovirus-based vaccines also requires significant technical know-how.
While the arguments for and against this position can be debated, it is clear that a major concern for the industry is that, if such a position were to be enacted, it could lead to a wider erosion of IP protection, which is fundamental to the industry’s R&D basis – something that some politicians have already called for. And it comes at a time when investors have become increasingly nervous about biotech as a sector, which has been evident in the fact the Nasdaq biotechnology index having fallen by 15% from its early February peak and by 1.6% year to date.
BB Biotech’s stock has outperformed the US biotech index this year – it is up by 9% year to date, albeit with the premium to NAV having grown. QuotedData initiated coverage in February.
Moderna is due to report its Q1 earnings later today, with expectations that it will record Covid vaccine revenue of $1.6bn in the quarter. Moderna yesterday disclosed positive initial data from a Phase 2 study tests of two newer versions of its COVID-19 vaccine, one of which is aimed at the variants of concern identified in South Africa and Brazil.
The Biden Administration’s position on IP also hit shares of several other biotechs producing or developing Covid vaccines, including BioNtech (Nasdaq: BNTX, -3.5%), Novavax (Nasdaq: NVAX, -5%) and Curevac (Nasdaq: CVAC, -7%) although it did not seem to affect the stocks of the main pharmaceutical companies involved in this area, AstraZeneca, Pfizer and Johnson & Johnson.