Monday, May 25, 2020
Vaccine Industry: Flowers Blooming amidst Chaos
New Opportunities Emerge for Vaccine Makers
Vaccine Industry: Flowers Blooming amidst Chaos
  • By William Ku
  • March 16, 2020, 17:45
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The author is an analyst of NH Investment & Securities. He can be reached at -- Ed.


With Covid-19 having entered the global expansion phase, we turn attention to cases of earnings growth at global vaccine makers after the 2009 H1N1 flu epidemic. We advise focusing on leading domestic vaccine makers SK Chem (initiate) and Green Cross (our pharma sector top pick).

Look to cases of rapid earnings growth at vaccine players following H1N1 flu epidemic

Covid-19 has officially entered a new phase, now being classified as a global pandemic. While Covid-19 was originally predicted to subside within one-two months (similar to the cases of MERS and SARS), it now appears that comparisons with the 2009 H1N1 flu epidemic are more appropriate. We note that earnings at global vaccine players jumped 30% y-y in 2010 on spreading consumer awareness towards the importance of infectious disease prevention following the outbreak of H1N1 flu. We advise focusing on leading domestic vaccine makers SK Chemicals (SK Chem) and Green Cross.

2011-2014 saw vaccine industry stagnation and restructuring

Unlike other medicines, which are generally used for the treatment of diseases, vaccines are typically used for preventive purposes in healthy children and adults. We note that: 1) existing products with strong histories of prescription appear advantageous; 2) as the public good is a major consideration, pricing faces some constraints; and 3) typically long development times present challenges from a business feasibility standpoint. Weighed upon by such limitations, the vaccine industry stagnated over 2011-2014, with large pharmaceutical companies such as Novartis selling their vaccine divisions or undertaking restructuring.

New opportunities have emerged since 2015

Since 2015, the vaccine industry has seen opportunities to leap forward. These can be summarized as: 1) the successful establishment of high-end premium vaccines; 2) improved efficacy (thanks to the addition of adjuvants) and the rising penetration of late-market products; and 3) a shortening of the development period via fast-tracking. Meanwhile, cancer vaccines are enjoying new attention as combination therapies in conjunction with immunotherapy cancer drugs, with Moderna and BioNTech (developers of therapeutic cancer vaccines) each amassing significant Nasdaq market caps of W8.0tn~W9.0tn. We note that the recent spreading of Covid-19 has led to a sharp rise in share price for many global vaccine players, including Novavax, Emergent BioSolutions, and Medigen Vaccine Biologics.