Omicron Variant Could Require Its Own Vaccine

We're not making any changes to our fair value estimates for the leading global COVID-19 vaccine makers--Pfizer PFE, BioNTech BNTX, and Moderna MRNA--following reports of the new omicron variant, as we see significant uncertainty around the profile of this new variant and whether it will require any additional shots beyond what is already included in our model. We already broadly include third-dose booster shots of these mRNA vaccines in our valuations, followed by annual shots for more vulnerable populations (infants and adults older than 65). While Pfizer's broad biopharma portfolio continues to support a wide moat, we think Moderna and BioNTech are still in the process of building sustainable competitive advantages, given the uncertainty around the future spread of COVID, the applicability of mRNA technology to other vaccines and treatments, and defense against similar or improved competing technologies. Pfizer/BioNTech and Moderna have disclosed some information on strategies and timelines until a new vaccine could be developed, and we estimate that a new vaccine could be available targeting the omicron variant in six months, if necessary. On Nov. 26, the World Health Organization designated the latest COVID-19 variant, B.1.1.529 (now omicron), a variant of concern due to a large number of mutations and preliminary data pointing to potential transmission and immune escape advantages over other variants. BioNTech has said that we should know more about the efficacy of the currently available vaccines against omicron in a couple of weeks, following completion of some lab tests of the ability of antibodies from the vaccine to neutralize the new variant. Established manufacturing capacity--which is poised to reach 4 billion doses annually at Pfizer/BioNTech and perhaps 3 billion annually at Moderna (depending on dosage)--could be easily switched to a new variant vaccine, as raw materials and manufacturing processes remain the same.

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