Just in the past two months, Wall Street investors have pumped billions into a handful of early-stage biotech companies to produce vaccines or drugs to combat. Some of these companies are promising treatments, experts say, but others are likely to turn out to find a cure. The result: a coronavirus investment bubble that is already approaching nearly $ 200 billion in stock market value.
On Monday, 15 percent of the vaccine developer’s Novavax news spiked that the company began testing its coronavirus vaccine on people in Australia. The results of the trial, which is only the first phase of getting a vaccine approved for widespread use, will not be available until July. Investors are still impressed: Novavax̵
Since the coronavirus lockout began across the United States in mid-March, the total stock market value of the eight biotech companies in the S&P 500 stock index has swelled to $ 130 billion to just over $ 600 billion. The total value of half a dozen smaller biotechs outside the S&P 500 working with coronavirus treatments or vaccines has grown to more than $ 40 billion.
Most of these shares were unknown to average investors even a few weeks ago. Now it’s the talk of CNBC, Yahoo Finance, Reddit message boards and other places that market gurbs are gathering these days.
“There is no doubt that you are in the middle of the kind of situation you are in now, it is very easy to have overvaluation due to over-exuberance,” said Finance Professor Andrew Lo of MIT’s Sloan School of Management.
Lo compared the coronavirus era biotechnology to the tech stocks mania in the late 1990s, and later to bitcoin and other digital currencies. “We are all very impressed by Facebook, though [early competitors] MySpace and others, we don’t remember them.
Not everyone is ready to call the biotech stocks a bubble. First, as speculative spasms go, it would be on the small side. The Dotcom bubble reached a peak of about $ 2 trillion a generation ago, or 10 times greater than what is happening now. In addition, bubbles tend to hang around for a while before they appear. Coronavirus populations have only increased for a few months.
The Swiss-based Financial Crisis Observatory, whose mission includes scanning the investment horizon for signs of surplus, is actually not concerned at the moment.
“It is possible that there are bubbles in some biotech layers,” says the observer’s manager, Didier Sornette, professor at ETH Zurich. “But the biotechnology index has not yet developed a significant bubble based on our metrics.”
The biggest biotechnology: Modern
The biotech stock that has attracted the most money from investorsare Modern. The company’s stock market value has grown more than 300% in just five months to nearly $ 30 billion last week, making Moderna one of the most valuable biotech companies. (The market value floated to about $ 25 billion on Wednesday.)
Moderna is now also the largest holding in the popular Biderech stock exchange Spider S&P. More than $ 500 million has flowed this year to the ETF, which now manages $ 5 billion for investors from retirees to large pension funds.
Much of the investor enthusiasm is due to the positive buzz surrounding the early test results for a coronavirus vaccine that Moderna is competing to develop. No less an authority than Dr. Anthony Fauci, the country’s highest expert on infectious diseases, has called the results “promising.”
Few company executives have seen their net worth increase more than CEO of Moderna Stephane Bancel during the pandemic. His shareholding in the company has nearly tripled in value since January to just over $ 1.5 billion.
However, Modern is far from a safe investment for new investors. The company, founded in 2010 in Cambridge, Massachusetts, has a history of great promises with few results to date. In 2016, Moderna said it accelerated the development of a vaccine against the Zika virus and that it had secured funding for “large-scale manufacturing.” Four years later, the company has not yet launched a single vaccine or treatment to the market.
In 2017, Bancel said that within five years, his company would have “twice as many drugs in the clinic than anyone else in the world.” Today, Moderna has 22 vaccines under development, but only three of them are in Phase II studies. The Zika vaccine is still undergoing phase I tests, while others have been abandoned.
In early March, Bancel told President Donald Trump during a meeting with the White House with biotech leaders that Moderna would have a vaccine ready for extensive testing in “a few months.” Other industry leaders in the room said a vaccine would take a few years.
The share heard ‘around the world
Much of the excitement surrounding Moderna has to do with its use of a new scientific technology that, if successful, can in theory produce vaccines much faster than the traditional method, which is to develop and grow a benign version of a virus in a lab and inject it into healthy people. Instead, Modern creates synthetic proteins to alter a person’s DNA to effectively produce the benign virus in the body, and skip the step of having to grow it in the lab.
While the technology is new, the idea is to use “messenger” proteins to warn cells that a virus is not coming. Modern Chief Scientific Officer Melissa Moore, who was hired in 2016, told Wired that after joining biotechnology, she realized that it was using a technology that she had mapped three decades earlier while still a student.
As for today’s coronavirus, Modernes announced last week that the vaccine had caused patients in Phase I studies to create coronavirus antibodies – a message that pushed up its 30% share price in one day to $ 87 a share on May 18 – was soon asked by outside observers . The results had not been reviewed by peer or published in a medical journal, which is standard practice in drug development. And the news site STAT reported that four of the patients in the Mother’s trial had experienced significant, but not life-threatening, side effects.
Also worrying: Bancel, who joined the vaccine developer in 2011, and several other top executives in Modernain the days following last week’s release of the preliminary trial results. Most of these sales were made through predetermined stock plans for executives, the company noted, and there is no charge of illegal insider trading.
On Tuesday, Moderna revealed more insider sales. Chairman Afeyan Noubar and an investment fund he controls sold 1,000,000 shares last week at prices between $ 66 and $ 72 per share, according to a regulatory filing. The submission does not mention the type of predetermined share sale plan used by Moderna’s top executives.
In addition, the company announced early last week to sell $ 1.2 billion in new shares to the public less than 12 hours after it released the vaccine testing news on May 18. Modern shares jumped to a high of $ 87 that Monday, but have since fallen to $ 49 – well below the $ 76 price it sold the stock to investors last week.
A Moderna spokesman did not return a request for comment for this story. The spokesman said earlier that all stock sales of managers had been ordered.
Derek Lowe, who writes a widely followed drug blog called In the Pipeline, noted that Mother’s vaccine has a long way to go. But there is hope for a positive result, he said, even though the odds are long.
Lowe said that 80% of drugs pass Phase I studies, as Moderna has done, but only 10% pass Phase II. “People are [concerned] about the side effects, “he said. But the fact that Modern’s vaccine could produce antibodies is a hopeful sign. Lowe concluded that” These results are better than I expected because we didn’t know their technology was working at all. “