Encouraging Lab Data From Pfizer/BioNTech on Omicron

We're maintaining our fair value estimates for mRNA vaccine firms Pfizer (PFE), BioNTech (BNTX), and Moderna (MRNA) following an initial, encouraging update on vaccine efficacy against the omicron variant. Pfizer/BioNTech have tested how well their vaccine defends against the new variant by mixing immune sera from vaccinated individuals (shortly after receiving their second or third doses) with a pseudovirus, or a lab-created virus that has omicron's version of the spike protein, but can't replicate and is less dangerous to work with. Early data show that the ability of antibodies in the sera to neutralize omicron after three doses of the vaccine is similar to what was seen for the original virus and earlier variants after just two doses. Individuals who have received two doses have lower protection against omicron that the firms believe may still protect against severe disease (largely due to continued T-cell protection) but likely not against milder infections. We already broadly include third-dose booster shots of these mRNA vaccines in our valuations, followed by annual shots for more vulnerable populations (infants and adults over age 65). While Pfizer's broad biopharma portfolio continues to support a wide moat, we think Moderna and BioNTech are still in the process of building sustainable competitive advantages, given the uncertainty around the future spread of COVID-19, the applicability of mRNA technology to other vaccines and treatments, and defense against similar or improved competing technologies.