In the race to gain control over Covid-19, pharmaceutical companies came to the fore. And now, since their rapid development of safe and effective vaccines, the world is at their feet, says Andrew Dittberner of Old Mutual Wealth.
Covid-19 has profoundly changed how we live, socialise, work and move around; in essence, it affects every aspect of our lives. However, a positive impact of the pandemic lies in vaccine development, as the technological advances achieved in tackling the virus have shaped the future of vaccine science.
A race against a virus
Historically, the time it takes to develop and market a vaccine varies, depending on the vaccine. The chickenpox vaccine took 28 years from the start of the research to full US Food and Drug Administration (FDA) approval, whereas the mumps vaccine took four years. However, the Covid-19 vaccines broke records by going from development to approval in less than a year.
An unprecedented global collaborative effort and major technological advances were the main factors driving the rapid development of a Covid-19 vaccine. The technology used today significantly reduces the first, exploratory stage of a vaccine’s development and further reductions were achieved in the third stage (clinical development) by overlapping the various phases of trials. Then finally, vaccine manufacturing began before licensing to allow the vaccines to reach the market as soon as possible following regulatory approval.
Today’s vaccine technology enables manufacturers to ‘programme’ cells to produce the required spike protein that stimulates the immune system to develop resistance to the relevant pathogen. To do this, manufacturers require the genetic sequence of the virus. Amid the initial escalation of the health emergency in Wuhan, Chinese authorities released the Covid-19 genetic sequence on 10 January 2020, having mapped it six days earlier.
With the sequence in hand, scientists across the world were immediately able to start planning vaccine development. The Covid-19 vaccinations are the first to make use of this approach, which is expected to allow many other vaccinations and treatments against known diseases to be produced in a relatively short time at a much lower cost.
The investment opportunity
It’s not often a business can cite the entire globe as its target market, but the manufacturers of the Covid-19 vaccines are in this enviable position. And while vaccines are the talk of the town today, this has not always been the case. Pharmaceutical companies have regarded curing illness through medicine as far more profitable; medicines are often taken on an ongoing basis, as opposed to vaccines, which are typically once-off treatments. As a result, vaccines have found themselves in the back alley of the pharmaceutical industry, until recently.
Balancing growth and defensive opportunities in healthcare
With the World Health Organisation recently recommending the use of a malaria vaccine in sub-Saharan Africa, it is clear vaccines are going to be utilised more widely. With recent advances in technology, we can expect they will play an ever larger role in protecting us against infectious diseases.
The PCS Global Equity Portfolio maintains exposure to a number of biotech businesses (including Moderna and BioNTech) that are involved in the technology of medicine and focus on aspects such as mRNA. Our portfolio also has exposure to vaccine manufacturer J&J which, as the world’s largest healthcare company, produces a wide range of treatments for immunology, oncology, and infectious and cardiovascular ailments. Importantly, there is no excessive exposure to a single ailment or patent loss. We
believe this diversification will continue to support stable earnings and dividend growth.
Furthermore, J&J’s large research and development budget helps to maintain a significant moat around the pharmaceutical segment. This is one of the key reasons the group has some of the leading drugs in the markets in which it operates; a position we believe it will retain going forward.
In this way, we maintain meaningful exposure to the exciting innovations and technologies that will generate both vaccines and treatments for major diseases and disorders.
Andrew Dittberner, Chief Investment Officer at Old Mutual Wealth Private Client Securities
About Private Client Securities
Private Client Securities (PCS) is a capability within Old Mutual Wealth, an elite service offering brought to you by several licensed Financial Services Providers in the Old Mutual Group. PCS specialises in bespoke investment management for high net worth investors. The above content is for information purposes only and does not constitute financial or tax advice in any way or form. It is important to consult a financial planner to receive financial advice before acting on any of the above information.