The German Federal Ministry of Education and Research notified CureVac (NASDAQ:CVAC) on Sept. 4 that it would get $299 million in support grants to help with its development of a novel coronavirus vaccine. This sounds like a good thing for CureVac stock, but what does it mean?
After all, the German government could give it $2.99 billion, and that still doesn’t guarantee that it will make it across the finish line with purchase orders in hand.
As I write this, CureVac has been a public company for 34 days. In this time, CVAC stock’s gained 237% from its IPO price of $16. Interestingly, it gained more than that in its first-day return. In fact, by its second day of trading, CVAC had made IPO investors an astounding 383% return.
If you were smart, you took your profits. Why do I say this?
They May All Strike Out
My wife, who doesn’t pretend to be some science wonk, continues to wonder what will happen if a vaccine is never found.
After all, scientists identified the human immunodeficiency virus (HIV) in 1984. Margaret Heckler, the U.S. Secretary of Health and Human Services at the time, boldly predicted that a vaccine would be ready for testing in 24 months. In the 36 years since Heckler’s bold proclamation, 32 million people have died, and we’re still waiting for an HIV vaccine.
“Influenza is able to change itself from one year to the next, so the natural infection or immunization the previous year doesn’t infect you the following year. HIV does that during a single infection,” Pediatrician and infectious disease specialist, Paul Offit, told CNN in May. “It continues to mutate in you, so it’s like you’re infected with a thousand different HIV strands. (And) while it is mutating, it’s also crippling your immune system.”
Admittedly, the novel coronavirus doesn’t mutate rapidly, unlike HIV and malaria, and so the odds of scientists finding successful vaccines to use safely on humans is much higher.
“The coronavirus’s sluggish pace of mutation is good news for us: A virus that evolved more rapidly would have a greater chance of outrunning any vaccines or drugs developed to counter it,” Evolutionary virologist Dr. Edward Holmes stated Sept. 11 in The New York Times.
“…To my knowledge, there is to date no evidence that SARS-CoV-2 has become more virulent or more lethal – nor, for that matter, that it has become less so.”
So, while finding a vaccine for Covid-19 appears to be an easier task than HIV, the spinal cord damage suffered by a patient in the AstraZeneca (NYSE:AZN) clinical trial in Britain suggests that an effective and safe vaccine is unlikely to be had before the end of the year.
“The investigators [in the AstraZeneca trial] have inadvisedly been hyping their own vaccine,” Vanderbilt University School of Medicine infectious disease specialist William Schaffner said recently. “The Oxford investigators were out there this summer saying, ‘We’re going to get there first.’ But this is exactly the sort of reason … Dr. [Anthony] Fauci and the rest of us have been saying, ‘You never know what will happen once you get into large-scale human trials.’”
That’s why CureVac continues to receive investor interest. You never know. All the trials currently in Phase 3 and 2 could fail while CureVac moves through Phase 2 and 3 with little or no issues.
It could happen. But will it?
What Happens to CureVac Stock If It Fails?
At some point in the fourth quarter, CureVac will report its findings from its Phase 1 clinical trial. CureVac will use the results from its Phase 1 clinical trial to identify the optimal dose for its vaccine candidate. Once it knows this, it can start its Phase 2b study later in the year.
CureVac will get $122 million of the $299 million by the end of 2020. It will get the rest in 2021. It’s already entered negotiations with the EU to supply up to 405 million doses of its vaccine.
So, things are moving along. My InvestorPlace colleague Josh Enomoto is cautiously optimistic about CureVac’s chances.
“Potentially benefiting CureVac stock and its direct competitors are the many advantages of nucleic acid-based vaccines. At this juncture, the most critical are ‘stimulation of innate immune response’ and ‘rapid and scalable’ production,” Enomoto stated on Sept. 9.
“What could tip the scale in favor of CVAC is its experience working with coronaviruses (MERS in 2017). Additionally, the company claims it has the ‘capability to manufacture mRNA-based vaccines in a huge scale.’”
The Bottom Line
As they say, it’s not where you start that counts, it’s where you finish. In this biotech crapshoot, anything could happen.
Will the $299 million make a difference to CureVac’s vaccine development? You bet it will.
Will it be what pushes CureVac to victory? I highly doubt it.
As Josh also said, the Covid biotechs are off-the-charts volatile. Only bet on CureVac stock if you’re confident you won’t need the money you’ve bet on its success.
And, yes, none of the current contenders may come up with a vaccine. If that happens, CVAC won’t be trading at around $50 for very long.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.