Issue of the week: Boom time for British pharma
Vaccines and drugs hold the key to economic recovery. No wonder the deals are multiplying
Spare a thought for Neil Woodford, the “fallen star” of British fund management, said Alistair Osborne in The Times. Only a year ago, people were mocking his “biotech genius” – reflected in a series of dire punts on the likes of the respiratory drug discovery group, Synairgen. But look what happened this week: positive results from an early trial of its SNG001 coronavirus treatment “thankfully left investors far more breathless than patients”. Shares in the Aim-listed firm rocketed 421% in a day. A shame for Woodford – but great news for the rest of us. The breakthrough coincided with news that a Covid-19 vaccine, developed by Oxford University and AstraZeneca, was both safe and effective in early trials. All in all, a great week for British pharma.
“Vaccines, once seen as a neglected Cinderella industry, have never been so hot,” said Lex in the FT. AstraZeneca shares hit fresh highs this week; a surge this year had already made it the most valuable company in the FTSE 100. “Making money from vaccines is difficult, because of the high risk of failure, heavy sunk costs and uncertain markets.” And given that some 170 Covid vaccines are in development, “many also-rans will suffer losses”. Investors should hedge their bets: it’s worth backing various approaches to spread risks – particularly as this isn’t “a winner takes all market”; there is “a need for multiple success stories”. Britain’s other big pharma, GlaxoSmithKline, also “leapt into action” this week, said Nils Pratley in The Guardian. GSK, one of the world’s biggest vaccine makers, has paid £130m for 10% of the German group, CureVac, which “briefly registered on US President Donald Trump’s radar” (he wanted the US to buy the firm’s vaccine). GSK won’t have a role in CureVac’s Covid programme – it is developing its own vaccine in conjunction with Sanofi. But it will “have exposure” to any success via its equity stake. This new willingness to take punts is good news for shareholders. “There are no guarantees, but being big in vaccines suddenly looks a much-needed point of advantage.”
“Every positive sliver of vaccine news sparks a corresponding spike in world markets,” said Ben Marlow in The Daily Telegraph. Every setback sees “prices head south”. The vaccine race is a reminder of why this crisis is unique. Previous downturns have always been solved by economic policy. But all the stimulus in the world “can’t prevent fresh outbreaks, and whenever there are relapses, recovery will be halted”. As the markets have already worked out, “the rebound won’t be decided by economists and policymakers; it’s in the hands of the world’s best scientists”.