By Robert Francis, Australian Managing Director of global multi-asset investment platform eToro
2020 has been one of the most eventful years in history, with the coronavirus pandemic redefining our expectations of the new decade.
While the pandemic is ongoing and billions of people around the world continue to live in a new reality, the end of the pandemic may finally be in sight, albeit still distant. What does this mean for markets?
Now, pharmaceutical (pharma) stocks are in the hot seat, generating significant interest amongst retail and institutional investors.
According to statisca, as of the end of 2019, the total global pharma industry was valued at $USD1.25 trillion, and it’s expected to reach $USD1.57 trillion by 2023.
But the question remains; will the big pharma buzz die down once the world is vaccinated?
Vaccinating the globe: the companies leading the COVID-19 fight
Since the World Health Organisation (WHO) declared coronavirus as a global pandemic, it became clear the only way to defeat this virus would be with an effective vaccine.
While almost every country in the world repeatedly went in and out of lockdowns, scientists and medical professionals were diligently working around the clock to find a solution.
Then, when the news broke that three leading vaccines were gearing up for deployment, people were finally given a reason to be hopeful.
American pharma giant Pfizer and German biotech company BioNTech were the first to announce a successful Phase III trial.
Thanks to an incredible effort, tremendous financial resources, numerous hours and an abundance of volunteers, Pfizer-BioNTech was able to achieve a remarkable success rate of over than 90 per cent in just nine months.
The Pfizer-BioNTech’s vaccine uses relatively new technology, employing mRNA to teach the body how to create COVID-19 antibodies.
The vaccine is currently being deployed around the world in countries such as Europe, Canada, the US, the UK, Singapore, Chile, Australia, and some Middle Eastern countries.
Just one short week later, Massachusetts-based biotech company Moderna made a similar announcement, demonstrating even better success rates with its vaccine, which is also mRNA-based.
Moreover, while Pfizer-BioNTech’s vaccine requires supercooling to -70 degree centigrade, that of Moderna only needs -20 degrees, which makes the logistics of storing and distributing it easier.
Both Pfizer-BioNTech and Moderna have received emergency FDA approval, which made it possible for the vaccines to be shipped out immediately.
The third company to announce its trial results was British-Swedish company, AstraZeneca. Its vaccine was developed in partnership with Oxford University and uses a different method than Pfizer and Moderna, making use of modified virus DNA to trigger the immune system into creating antibodies.
Despite some contradictory data, the company has said that its vaccine is 90 per cent effective.
While the AstraZeneca vaccine has not yet been approved by the FDA, it is the most robust of the three, as it can be stored and transported at 2-8 degrees centigrade, which is standard refrigeration temperature.
As the vaccines are administered to the general public, this also provides broader market opportunities. Robotic process automation specialists Blue Prism for example, has developed an automated solution for fast-tracking vaccination management, enabling healthcare providers to order, register, track, and distribute vaccinations reliably and at scale. Real-time analysis and predictive analytics are also able to be integrated with the likes of Health and Human Services, National Institutes of Health, and John Hopkins University, so more vaccines can be deployed from these providers as quickly as possible.
Risks and opportunities of the COVID-19 vaccines
Despite the monumental global effort that has shattered the record for vaccine development, there are still some reservations that some people have in regards to getting the vaccine.
In some countries, the COVID-19 vaccine effort has hit a few speed bumps including stock shortages, transportational issues, government issues related to convincing the general public to get vaccinated, and deployment to vulnerable communities and at-risk groups, which have been slower than expected.
Nonetheless, experts have expressed confidence that the highly efficacious vaccines are reaching the market, and we are beginning to see the light at the end of the tunnel (or in this case end of the needle) of the pandemic.
To arrive in a post-pandemic era, in which populations experience herd immunity, vast numbers of dedicated individuals will need to continue working intensely in the months and years ahead.
And for investors, the market reaction for these big pharma companies has been immediate.
The demand has been so high that companies like multi-asset investment platform eToro has seen pharma stocks dominate their 10 global stocks lists month-on-month in 2020.
Investors have been looking to pharma stocks – and not just necessarily vaccine-related – for their potential to reap strong long-term returns that outperform the broader market.
These returns are possible because pharma companies continue to develop other products such as drugs that treat or prevent diseases, broader vaccines and more. These companies also continually invest in research and development to launch new drugs.
With ageing populations, many whose citizens need prescription medicines, is an additional boost to the healthcare sector, for pharma companies in particular.
The future of big pharma
Over the next 20 years, experts at Deloitte have estimated that the pharma industry will be shaped by “five forces” from both inside and outside the industry.
The five forces include prevention and early detection, customised treatments, curative therapies, digital therapeuticals, and precision intervention.
By this theory, some diseases will be prevented, cured, or managed with non-pharmacological interventions by 2040.
However, in the present day, everyday Joes and Jills will be waiting eagerly for their dose of the COVID-19 vaccine in order to return to some form of ‘normality’.
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