AstraZeneca (LSE:AZN) announced the results of its phase 3 Covid-19 vaccine trials yesterday which is excellent news for one particular biotech stock.
A new Covid-19 vaccine from AstraZeneca
The trial results were positive, but the AstraZeneca share price barely moved on the news. The muted response is likely attributable to the company’s ‘no profit’ policy for its vaccine launch. The vaccine, AZD1222, was tested using two separate dosing regimens.
The first dosing regimen consisted of a half then full dose one month apart and showed a 90% efficacy. Patients in the second dosing regimen received two full doses one month apart and showed a 62% efficacy. The combined results showed a 70% overall effectiveness.
While this would be considered a breakthrough a few months ago, in comparison to the 95% efficacy of Pfizer’s and Moderna’s vaccines, AZD1222 appears underwhelming. However, it has a distinct advantage over both.
The vaccines from Pfizer and Moderna require cold storage conditions of -70°C, and -20°C, respectively. AstraZeneca’s vaccine can be stored for up to six months at a temperature of 2°C–8°C.
Maintaining sub-freezing temperatures in transit is a complicated and expensive process, making the availability of the vaccine in poorer nations minimal. By not requiring less demanding storage temperatures, AZD1222 may prove to be the most viable vaccine candidate for mass distribution.
A biotech stock opportunity
The vaccine was developed and manufactured with help from Oxford Biomedica (LSE:OXB) as part of a supply agreement signed in September. I’ve discussed the biotech stock in previous articles. As a quick reminder, Oxford Biomedica is a gene and cell therapy group. It offers a proprietary platform, LentiVector, that allows pharmaceutical companies to develop new drugs at a significantly reduced cost.
The supply agreement is active for 18 months. The biotech company is responsible for the manufacturing of AZD1222 until the end of 2021 unless the contract is extended.
Initially, the firm received an upfront payment of £15m from AstraZeneca. It expects to generate an estimated £35m from this contract alone by the end of 2021. This represents a huge growth opportunity for the company. The combined £50m revenue represents nearly 80% of the total revenue achieved in 2019 pre-Covid-19.
With this added boost and the continual growth of its LentiVector platform, I’ve forecasted total revenue for 2021 to be in the £100m–£120m range – almost double what it is today.
However, it is essential to remember that this additional revenue is only temporary and may cease to exist after 2021. Still, it does grant a significant boost in available capital for the business to reinvest and increase the value of its platform for its clients.
The bottom line
AstraZeneca’s noble non-profit stance is a social victory. However, Oxford Biomedica is the real financial beneficiary of AZD1222’s successful trials. The Covid-19 vaccine still requires regulatory approval, but AstraZeneca has already begun the filing process with multiple regulatory bodies around the world.
