Wall Street analyst’s perspective: taking the pulse of the nucleic acid-based prophylactic & therapeutic vaccine sectors
Nucleic Acid Insights 2024; 1(1), 31–36
What are you working on right now?
HS: I have worked as a biotechnology analyst at Oppenheimer & Co., Wall Street for 7 years now, during which a number of waves of innovation have come through in the sector. Currently, these waves are focused on digital tools—specifically, AI and its application in biotechnology. However, post-pandemic, there has also been a significant focus on nucleic acids and mRNA technology in particular. At the start of 2023, we published a white paper addressing this emerging trend .
These two areas stand out as the focal points of general interest in our current discussions with various stakeholders. Regarding mRNA, we have observed a considerable influx of private investment, while some noteworthy companies such as Moderna and BioNTech have entered the public domain. While smaller initial public offering opportunities are not yet prevalent, there is an expanding interest in this space.
How would you sum up how the financial markets have responded to both progress and setbacks in the nucleic acid-based prophylactic and therapeutic vaccine spaces over the past few years?
HS: Nucleic acid-based prophylactic vaccines, like the ones developed for COVID-19, have surprised many by creating significant value. Moderna’s market capitalization increased from roughly US$10 to 30 billion, and BioNTech’s from a few billion to $25 billion. Both companies now hold substantial cash reserves of approximately $10–15 billion each. This success can be attributed to their rapid development and introduction to market of prophylactic mRNA COVID-19 vaccines within a year of the start of the pandemic. As a point of reference, numerous industry professionals initially doubted the feasibility of such a quick development cycle. They were not necessarily skeptics, but they were uncertain whether nucleic acid technology had advanced to the extent necessary to allow this speed of progress. Nevertheless, nucleic acid-based prophylactic vaccines have provided significant benefits to society, both in terms of financial value and in saving human lives. It is estimated that hundreds of millions of lives have been saved by these vaccines over the last 3 years.
With therapeutic vaccines, however, the landscape is more complex. Moderna has recently seen promising Phase II results for a therapeutic vaccine for cancer, but overall, the promise of the field remains to be determined. Much more research is needed, and although there is consensus on the scientific and biological rationale for nucleic acid therapeutic vaccines, the challenge now lies in translating this knowledge into a commercial product.
How would you say the oligonucleotide and mRNA sectors in particular are bearing up at the moment, comparatively speaking?
HS: The current financing environment is obviously challenging, but having experienced several cycles in the biotech industry, I have developed a nuanced perspective. Currently, funding still seems readily available for companies demonstrating exceptional scientific advancements that translate effectively in clinical settings. Conversely, there appears to be a lack of funding for companies that resemble more of a science project, or that are several years away from presenting clinical data. This is especially true when either the regulatory path is uncertain or the causal biology behind the disease is not well understood.
To phrase it slightly differently, the financing environment is favorable for companies with robust scientific foundations that have successfully translated into clinical applications and possess some visibility toward a commercial product. In terms of mRNA, particularly given the success of Moderna and BioNTech, there seems to be a phenomenon akin to a gold rush.
A similar trend is emerging in the wider nucleic acid space, albeit more concentrated in private ventures at the moment. However, there is anticipation of a significant influx of public companies entering the market in the next 3–5 years, accompanied by substantial mergers and acquisitions activity within the next 5–10 years; let’s say, although this will likely conclude before the end of this decade.
What will be some keys to sustained recovery and future success for biotechs in these areas moving forward?
HS: One broad factor influencing the landscape is macroeconomics. A simple aspect of that, widely agreed upon, is the decrease in interest rates. This results in a more financially liquid environment, fostering easier financing—a macroeconomic boost.
Another thing to consider, however, is the potential persistence of high interest rates, coupled with robust economic growth. Again, though, even in such an environment, companies excelling in both great science and translation into the clinic can secure financing. This emphasizes the critical importance, particularly in biotech, of companies possessing science that translates well into clinical applications.
In the realm of nucleic acids, Moderna and BioNTech have demonstrated the significance of lipid nanoparticles (LNP) in ensuring effective mRNA delivery into targeted tissues. It’s worth noting that those companies that have made significant investments in optimizing LNPs likely hold a substantial lead of a few years over others in the sector. While LNPs are analogous to tiny fat droplets, their engineering complexity lies in encapsulating small mRNA molecules. When delivered subcutaneously, LNPs must traverse cell membranes, undergo controlled disintegration, and release mRNA—a series of technical challenges that many companies and contract manufacturers have yet to scale commercially.
Where and when do you expect to see RNA and DNA therapeutics having an impact?
HS: The most straightforward analogy for therapeutic cancer vaccines is that they are a turbocharger for the immune system. Much like attaching a turbocharger to a car engine for an extra boost, cancer vaccines can be administered alongside or following other therapies, providing a complementary benefit to ongoing treatments. However, addressing the challenges posed by the tumor microenvironment is crucial to success in this field. Dysfunctionalities within the immune system, often encouraged by tumors, make this a complex task. While progress is anticipated in cancer, significant scientific and translational work is still needed due to the dynamic and intricate nature of the tumor environment and immune system dysregulation.
In rare diseases, the outlook is optimistic but dependent on overcoming specific technical challenges. For instance, engineering mRNA to produce a missing enzyme regularly and in sufficient quantities poses a hurdle. Once these technical challenges are addressed, the prospects for mRNA applications in rare diseases are promising. The resolution of these hurdles is expected to trigger a swift scale-up of products into clinical trials and subsequent market entry.
In infectious diseases, the success of the mRNA vaccines for COVID-19 make this a highly promising approach. Indeed, positive results have already been seen in mRNA vaccines for influenza and RSV, with Moderna planning to launch soon in the latter. The outlook is optimistic for mRNA vaccines targeting various infectious diseases globally, as evidenced by the increasing number entering clinical trials.
There is also potential in applying mRNA technology to immune-related conditions, with its ability to up-regulate or down-regulate the immune system. However, despite this intuitive appeal, further scientific and causal biology work is essential across various autoimmune diseases to realize the full potential in this area. This comprehensive approach aligns with my general viewpoint on the current landscape.
As you look across the field today, what specific technologies and modalities catch your eye in terms of their potential, and why?
HS: I have been considering this topic a lot lately. Over the past 30–40 years, there has been a noticeable shift in the creation of value. Up until the 1990s, a substantial amount of value was generated from small molecule drug development. However, with the advent of companies like Genentech, followed by Regeneron and Amgen, among others, there was a significant shift towards creating value using biologics. However, I believe we are now witnessing a resurgence in small molecule drug development. I recently spoke with the Chief Scientific Officer of Vertex, who highlighted cryoEM, a tool that enables mapping of the molecular structure of small molecules with exceptional precision. This advancement allows for the careful selection of molecules to target specific diseases and their underlying pathology.
Thanks to innovative hardware and software tools, small molecule drug development is experiencing a renaissance, with better design and more targeted therapies on the horizon. Companies utilizing cutting-edge tools are speeding up the process of bringing small molecules through clinical trials and getting them commercialized much faster than the average rate of 7–9 years. For instance, Vertex developed each of its three CFTR modulators for cystic fibrosis in less than 4 years.
Digital tools, including AI, play a crucial role. While the immediate impact may not be fully realized due to the abundance of data in biotech, there is potential for significant benefits. The initial steps involve structuring data and creating predictive models. Large, well-capitalized biotech companies, such as Vertex and Moderna, are already employing these tools extensively. Over time, the utilization of digital tools is likely to expand, with standalone contract manufacturers, clinical research companies, and healthcare software companies providing these tools. Although this diffusion might take 5–10 years, I believe that forward-thinking biotech companies will increasingly leverage digital tools for enhanced efficiency and innovation.
What are the obstacles to the future success of nucleic acid-based vaccines and therapeutics that Wall Street worries about the most?
HS: The primary challenge lies in mRNA manufacturing. Creating an mRNA that can endure in vivo is difficult. Moderna, for example, has implemented numerous modifications to the mRNA at both ends, enhancing its robustness and protein generation capability. This involves intricate scientific processes that require companies to develop exceptional proficiency.
Additionally, the core LNP adds another layer of complexity. The engineering and scientific understanding required are exemplified by Moderna’s investment in advanced technology. In 2018, the Moderna CFO mentioned their use of a synchrotron, a sophisticated physics device, to delve into the atomic level for LNP generation. To illustrate the commitment, Moderna acquired its own synchrotron, underscoring the level of investment needed for success in this space.
It is crucial for investors in the public domain to grasp that despite the notable achievements of Moderna and BioNTech spanning over a decade, other companies are still in the process of overcoming similar obstacles. Much of what these companies have achieved is safeguarded by intellectual property. This intricate and protected knowledge base contributes significantly to their success.
Finally, what’s your personal vision for how nucleic acids will shape healthcare moving forward?
HS: The potential for nucleic acid technology in the biotech industry is enormous. Currently, we have glucagon-like peptide companies specializing in glucagon-like peptide-1s for obesity nearing a market cap of $500 billion. Looking forward, I think it is conceivable that a nucleic acid company could emerge as the first trillion-dollar biotech company within the next decade.
The versatility of mRNA is significant in targeting diseases in ways that small molecules and biologics cannot. It is similar to uncovering a new frontier, allowing us to explore and address diseases more effectively. This expansion of possibilities, especially in rare diseases, oncology, immune-related conditions, and infectious diseases, could reshape the entire landscape of biotechnology on a global basis.
1. Oppenheimer Inc. Oppenheimer innovation series: mRNA technology, Jan 2023. Crossref
Hartaj Singh is a Managing Director and Senior Analyst covering Biotechnology. Prior to joining Oppenheimer & Co., Hartaj was a Managing Director and Senior Biotechnology Analyst at BTIG Securities. Hartaj began his sell-side career at Lehman Brothers, and subsequently moved to the buyside covering biotechnology at Visium Asset Management and Tecumseh Partners. He began his career as a Clinical Trial Project Manager for ClinTrials Research, and also worked as a Strategic Analysis Manager for Johnson and Johnson, both of which give him critical experience in clinical trial design. Hartaj has a BA in Biology from Case Western Reserve University, and also did extensive graduate work in computational neurobiology. He also holds an MBA from Duke University’s Fuqua School of Business.
Managing Director and
Senior Analyst, Biotechnology,
Oppenheimer & Co., Inc.
Authorship & Conflict of Interest
Contributions: The named author takes responsibility for the integrity of the work as a whole, and has given their approval for this version to be published.
Disclosure and potential conflicts of interest: The author has no conflicts of interest.
Funding declaration: The author received no financial support for the research, authorship and/or publication of this article.
Article & Copyright Information
Copyright: Published by Nucleic Acid Insights under Creative Commons License Deed CC BY NC ND 4.0 which allows anyone to copy, distribute, and transmit the article provided it is properly attributed in the manner specified below. No commercial use without permission.
Attribution: Copyright © 2024 Singh H. Published by Nucleic Acid Insights under Creative Commons License Deed CC BY NC ND 4.0.
Article source: Invited.
Interview held: Nov 16, 2023; Revised manuscript received: Jan 17, 2024; Publication date: Jan 24, 2024.