AstraZeneca‘s (LSE:AZN) Covid-19 vaccine has been approved for emergency use in the UK this morning.
There had been some confusion surrounding the initial trial dosing regimens and subsequent results. However, the pharmaceutical giant was successful in proving the vaccine is both effective and safe.
What’s next for AstraZeneca?
Working alongside the NHS and other government bodies, AstraZeneca aims to deliver 100 million doses over the next year, with the first batch ready very soon. This is over double the 40 million doses ordered for Pfizer’s vaccine, and over 14 times those ordered for Moderna’s.
I previously wrote that AstraZeneca’s vaccine would become the best choice for the UK and countries worldwide. And I’ve been right so far. You see, despite the higher efficacy of both Pfizer’s and Moderna’s vaccines, they both suffer from a significant disadvantage. They require extraordinary refrigeration of -70°C, and -20°C, respectively, whereas AstraZeneca’s only needs to be kept between 2°C and 8°C. That’s a standard fridge temperature.
Storage facilities in the UK and abroad that can support such sub-zero temperatures are few and far between. This drastically reduces the viability of storage and distribution for Pfizer’s and Moderna’s vaccines, especially in poorer nations.
It’s for this reason that Malaysia has ordered an additional 6.4m doses of AstraZeneca’s vaccine. Furthermore, the company is working closely with its global partners to set up the infrastructure needed to manufacture up to 3bn doses every year.
A hidden gem in the biotech sector
This is undoubtedly fantastic news for AstraZeneca and the public in general. But I won’t be buying shares in the business. Despite the stock being up on the announcement, it’s important to remember that AstraZeneca has stated its vaccine is a no-profit project.
But there’s one stock that greatly benefits from this announcement — Oxford Biomedica (LSE:OXB) — a share that I myself have bought.
The biotech firm specialises in gene and cell therapies. It has been working closely with AstraZeneca throughout the development of the vaccine. The stock offers a proprietary platform called LentiVector, which allows drug developers to pursue new treatments at a fraction of the cost.
In September, Oxford Biomedica signed an 18-month supply agreement with AstraZeneca for its vaccine’s large-scale manufacture. It has already received an initial payment of £15m to get things going and expects to generate another £35m throughout 2021.
The combined additional £45m represents 80% of the firm’s revenue in 2019. After adding the income it makes from its other projects, this agreement will likely double the firm’s total revenue in a single year.
And what’s more, the signed agreement can be extended by another 18 months. With AstraZeneca aiming to supply those 3bn doses worldwide, this seems quite likely to happen in my mind.
The bottom line
Oxford Biomedica’s revenue from the vaccine may not be sustainable in the future. However, it provides a surge of additional income that will allow it to bolster its LentiVector platform further.
For that reason, even at its current valuation, the stock looks cheap in my eyes, given its potential to shape the drug development industry’s future.
