Biotech General Discussion

In an accompanying blog post, we provide details about the rare thrombotic side effects that have been seen with all the COVID vaccines, including the J&J vaccine, although the events appear more prevalent (but still rare) in the adenoviral vaccines, like J&J's. Regardless of the mechanism, it appears highly likely that the J&J vaccine will be cleared again for vaccinations this week, although it will almost certainly come with warnings and/or restrictions, likely against people that are 55 or under, and possibly especially females. Thus, the market potential for J&J's vaccine, and possibly other adenovirus-based vaccines could be significantly reduced.

Which small/mid-cap COVID vaccine companies are using an adenoviral vector in the COVID vaccine candidates?

We used our new pipeline screener on BPIQ.com, to find the answer. VXRT ($600M market cap), $ALT (market cap $435M), and IBRX ($6.7B market cap) are small and mid-cap COVID vaccine companies that utilize adenoviral vectors.

How likely is it that VXRT, ALT, and IBRX stock price will be significantly affected by further news this week and in the coming weeks regarding the J&J hold and the role of the adenovirus backbone in the side effects?

The value/price of neither VXRT, ALT nor IBRX were affected much by the J&J hold notice last week, although they all have been trending down in recent days along with the biopharma indices. Interestingly, all of these companies are testing different delivery mechanisms (oral or nasal) of their vaccine, and the VXRT and IBRX vaccines are directed to proteins in addition to the spike protein. Thus, there are variations in design that could have unknown effects on any possible blood-clotting side effect. Furthermore, especially for the J&J vaccine, the blood clotting side-effect is very rare (about 1 in 1 million). Taken together, and considering the relatively low implied volatility on these stocks currently, it seems likely that the J&J news will not affect VXRT and IBRX stock price too much this week, and in the coming weeks, unless a strong link is identified with adenoviral vectors and the thrombotic events with certain COVID-19 vaccine

VXRT's adenovirus COVID-19 vaccine

Are there any other small/mid-cap COVID vaccine companies that might benefit from the apparent superiority of RNA vaccines?

A quick search of our Pipeline Screener, identifies ARCT-021 as another RNA COVID vaccine in clinical trials. ARCT-021 uses ARCT's LUNAR (non-viral delivery) and STARR (self-transcribing and replicating RNA) technologies. The hope with these technologies is that ARCT-021 can be delivered in a single-dose and at a lower concentration to help meet global demand. Furthermore, ARCT is testing a lyopholized form of ARCT-021, which would not require ultra-cold storage.

So how has ARCT-021 looked compared to the Pfizer/BioNTech and Moderna COVID vaccines?

The market was underwhelmed by ARCT-021's phase 1 data because based on in vitro lab tests of blood from vaccinated people, it might not be efficacious enough without a second dose. As you can see from the figure below, neutralizing antibody data from ARCT-021's phase 1 trial with a single dose, does not appear to be nearly as strong as the Pfizer/BioNTech or Moderna vaccines after their booster dose, at least based on in vitro neutralizing assays. ARCT reported as follows regarding the in-vitro efficacy of its vaccine:

Responder peak geometric mean neutralizing antibody titers of 32, 33 and 46, following 5 µg single dose, 7.5 µg single dose and 5 µg prime-boost participants, respectively.

Neutralizing antibody titers in convalescent sera ranged from 12 to 1818 (but the mean was around 100 for even mild cases).

On the other hand, Pfizer/BioNTech, which tested a 10, 30, and 100ug dose with a booster dose, showed that levels in the 30 ug dose, which is used in Pfizer's approved vaccine, reached on average, somewhere around 500, similar to the levels observed in convalescent sera (See Pfizer FIG. below). This raised questions about whether ARCT's COVID vaccine will be sufficiently efficacious. Since that time ARCT has released a number of press-releases that attempt to give confidence that ARCT-021 will have sufficient efficacy in vivo. Thus, ARCT may have to go to a 2-dose administration and to a higher dose, which eliminates some of its advantages. However, a lyophilized version without the need for ultra cold storage and global supply demands, might still provide sufficient demand if ARCT-021 can attain efficacy levels close to the mRNA vaccines.

Near-term ARCT COVID data/updates and closing comments: ARCT should present data from its phase 2 study some time this quarter, with more than 500 participants dosed in the U.S. and Singapore, and in order to set the dosing for the phase 3 trial, which is scheduled to commence this quarter. It will be very interesting to see how its neutralization data looks with and without the boost, at the doses tested. With what appears to be such an important readout, it is surprising to us that volatility for ARCT is fairly low (in the single digit move stock price move range). We would have expected It to be much higher given the apparent important upcoming readout. Maybe the market feels that more in vitro data is likely to be similar to the phase 1 study, and data on protection levels against COVID-19 (phase 3) are needed to truly assess efficacy of this vaccine.

Is ARCT too late with its COVID vaccine development?

ARCT appears to be about 1 year behind Pfizer and Moderna and likely more than 60 months behind NVAX's vaccine. ARCT announced that it will start its Phase 3 trial this quarter, with the hope of completing the trial later this year to apply for emergency use authorization in one or more jurisdictions later this year (See March 1, 2021 quarterly update). With half of the U.S. adults already receiving one COVID VACCINE dose (See CDC tracker here), this appears too late for the U.S. However, there should be other countries with high COVID vaccine demand still remaining in early 2022, although many of the largest economies and most lucrative markets might be vaccinated by then. ARCT has focused some effort on Singapore, which seems to be a pretty good target country for ARCT. Furthermore, if boosters are needed next year and for some years thereafter, against the original Wuhan strain or current or new variants, ARCT could be in a position to compete for those vaccinations next year in the U.S. and Europe if it can achieve efficacy levels above at least 70% with no major safety issues.

Are we buyers of ARCT?

ARCT is not a top 10 holding for us, but given the significant possible upside over the next 9-12 months, we likely will maintain a small position in ARCT. This upside could be partially realized if ARCT can achieve much better Phase 2 neutralization assay data on a single dose, from their Phase 2 trial, or 70% or greater efficacy against any of the variants in the upcoming Phase 3 trial. Below is the neutralization data from ARCT's phase 1 trial that the market viewed negatively.

ARCT-021 neutralization data

Pfizer/BNTX neutralization data

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