The RSV virus has puzzled drugmakers for decades, killing thousands of newborns and older adults in the U.S. while one hoped-for vaccine after another fell flat in the lab. But four big pharmaceutical stocks — Pfizer, GSK, Moderna and Johnson & Johnson — could take the disease down sharply with the first-ever RSV vaccines, and soon.
Moderna stock surged 3% Wednesday after the company unexpectedly reported strong results for its final-phase RSV vaccine. Analysts say Moderna could be within a year of launching its shot, putting it almost in lockstep with the leaders, Pfizer and GSK. In May, the Food and Drug Administration is expected to review vaccines from both Pfizer and GSK to prevent RSV, formally known as respiratory syncytial virus.
Johnson & Johnson also is working on an experimental RSV vaccine. So is another company, Denmark-based Bavarian Nordic. All of these shots would inoculate older adults, though Pfizer also is working on a maternal vaccine for unborn babies.
If successful, the RSV vaccines will leapfrog 60 years of development setbacks. They also could fill the coffers of the pharmaceutical stocks for some time. SVB Securities pharma analyst David Risinger says companies going after older adult vaccines could reap $7 billion a year. The market for maternal vaccines could be worth $2.7 billion.
Trouble In Last Six Months
The past six months underscored RSV risks. An atypical RSV summer wave in 2022 mystified doctors. Then the fall wave was extreme.
Hospitalizations peaked in November at more than five per 100,000 people, according to the Centers for Disease Control and Prevention. That was four times higher than the same month in 2021.
The RSV spike strained hospitals and other health care providers already dealing with upticks in Covid and seasonal flu.
"You can think of it like forest management," said Phil Dormitzer, who heads up GSK's vaccine research and development. "If you don't have regular forest fires, the brush builds up and then you get a giant forest fire. That's what's happened with RSV."
Covid also has made sure that time is of the essence in this case. The same measures society took to control the spread of Covid also dampened cases of RSV. But as people emerged from isolation, mingled in groups and removed their masks, cases of RSV soared.
The Struggle To Find A Vaccine
Respiratory syncytial virus is a common condition that usually causes mild, cold-like symptoms. But in infants and older adults, who have underdeveloped or weakened immune systems, it can be deadly.
The quest to find an RSV vaccine has been long, starting in the 1960s. The first studies ended "disastrously," Dormitzer said. It all snowballed from there.
"An inactivated vaccine not only failed, it made the virus worse," he told Investor's Business Daily.
The chemical the researchers used to deactivate the virus flattened its proteins. In response, recipients' bodies made dysfunctional antibodies that didn't block the actual virus when they encountered it. Instead, they triggered a powerful immune response, and ultimately, two children died.
Numerous failed attempts followed in the years since.
"People didn't understand the mechanisms of why it happened, and it hampered the development of an RSV vaccine for quite some time," Bavarian Nordic Chief Executive Paul Chaplin told Investor's Business Daily. "Now, we understand why that original concept didn't work very well." Bavarian Nordic ADRs trade on the OTC market.
"For every serious setback, we need to understand why that new concept didn't work," Chaplin added.
Chaplin expects Bavarian Nordic to have Phase 3 data on its RSV vaccine in the middle of this year.
Changing The Course For RSV Vaccines
Why all the high hopes now that big-name pharmaceutical stocks finally will succeed at vaccinating against RSV? It all harks back to an aha moment a decade ago at the National Institutes of Health when a team of scientists found the exact protein structure — at the right time in its life cycle — to make a vaccine.
To understand the discovery, it's important to know how the virus does its dirty work. To spread, the virus must change one specific protein on its surface. This allows it to fuse with a healthy cell. From there, the virus dumps its contents into the healthy cell, starting the infection. The NIH scientists figured out how to freeze that single protein before it changes, GSK's Dormitzer says.
Think of the process like two soap bubbles, says Dormitzer. A pair of soap bubbles often fuse and become one upon contact. Instead of a soapy layer, the virus is wrapped in an envelope and the cell has a membrane.
"Unlike with soap bubbles, they need a little help to fuse, there's an energetic barrier to overcome," he said. "The (attachment protein's) primary job is to fuse those two bubbles — the one around the cell and the one around the contents of the virus — together."
Drugmakers have leaned into that discovery. The leading RSV vaccines produce antibodies capable of locking onto that protein before it changes. This prevents the virus from replicating.
Pharmaceutical Stocks Pfizer, GSK Lead; But Others Follow
In pivotal testing, GSK said its vaccine was almost 83% effective overall and more than 94% protective against severe RSV in adults age 60 and older with underlying health problems. Pfizer's experimental vaccine proved close to 67% effective overall and about 86% protective against severe disease.
Analysts say GSK's RSV vaccine appears to prompt more side effects than Pfizer's. But they note the adverse events reported are in line with other vaccines for older adults.
Dormitzer says GSK's vaccine employs a substance that boosts the immune system's response. This is called an adjuvant.
"The adjuvant contributes to this high (effectiveness)," he said. "But it brings some more reactogenicity. The side effects are all mild to moderate and transient. I think the trade-off is very strong."
The test results last year didn't spark either pharmaceutical stock. Pfizer stock ratings also have fallen. The shares have a Composite Rating of 69 out of a best-possible 99. This puts them in the top 31% of all stocks in terms of fundamental and technical measures, according to IBD Digital.
Eighty Percent Effectiveness For J&J Vaccine
Meanwhile, J&J has said its experimental RSV vaccine is 80% effective against severe RSV — measured by the number of lower respiratory tract disease reports — and 70% protective against any symptoms. The company is now running a final-phase study in about 23,000 adults age 60 and older.
Moderna late Tuesday unveiled interim results for its Phase 3 study. Among 37,000 adults age 60 or older, the experimental vaccine proved 83.7% effective against lower respiratory tract disease due to RSV. This is defined as two or more symptoms of the illness. Against more severe disease — three or more symptoms of RSV — the vaccine was 82.4% effective. Moderna said its vaccine is so far safe and well tolerated.
Moderna shares broke out of a cup-with-handle base with a buy point at 188.75 on Dec. 13, according to MarketSmith.com. Shares later fell, triggering a sell rule. Savvy investors are encouraged to cut their losses when a stock falls 7%-8% from its entry. Since then, Moderna stock has regained some ground.
Bavarian Nordic, which is also running a final-phase test, has studied its vaccine in healthy people age 18-50. Volunteers received either the RSV vaccine or a placebo. Exposure to the virus came 28 days later. Those who contracted RSV had a significantly lower viral load.
The company also said adults age 55 and older had strong increases in antibodies and T cells capable of taking on RSV.
Pharmaceutical Stocks: Pfizer's Gains On Maternal Results
Pfizer also is working on a maternal vaccine. GSK dropped its maternal vaccine last February due to unspecified safety concerns.
Pfizer stock gained ground after it reported its candidate vaccine was nearly 82% protective against RSV in infants from birth through the first 90 days of life. After six months, that dropped to about 69%, the company said in November.
Doctors will measure Pfizer's maternal vaccine against a monoclonal antibody from Sanofi and AstraZeneca called nirsevimab.
Unlike a vaccine, which prompts the body to make antibodies to prevent infections, drugs like nirsevimab simply give patients the antibodies they need to fight infections. AstraZeneca and Sanofi are seeking a broad approval in the U.S. for nirsevimab, meaning even healthy babies without a high risk of developing RSV complications could receive it.
Risinger at SVB Securities notes nirsevimab is 76% effective against all infections requiring medical help. But for more serious disease, Pfizer's vaccine looks competitive with effectiveness of about 82% vs. roughly 78% for nirsevimab, he said in a note to clients.
Challenges With Administering The Vaccine
One problem with the vaccine — and a challenge for pharmaceutical stock Pfizer — is that it needs to be administered late in pregnancy to ensure the antibodies pass from mother to unborn child. The timing of the RSV season is also tricky, especially for babies due in the spring or summer.
"The challenge for the maternal vaccines is that if babies are born before the RSV season, maternal-derived antibodies may decay, and infants may have less protection when the season starts, which is a possible concern as they are at highest risk," said Rosanna Ruiz, another SVB Securities analyst, in a note.
Another challenge for pharmaceutical stock companies? Premature babies. The mothers of early-term babies might have gone into labor too early to receive an RSV vaccine in time.
But Pfizer notes few options exist for infants hospitalized with RSV — just supportive care measures like oxygen and fluids.
"We've already seen a surge of RSV and children's hospitals across the United States are already at or nearing capacity," Pfizer said in an emailed statement to IBD on Dec. 21. "Almost every season it is the same — intensive care units and beds fill up due to RSV. What is key from our recent news is that for the first time we have a vaccine that can help reduce severity of this disease and, if approved, potentially keep more infants out of hospitals every single year."
Pharmaceutical Stocks And The Future Of Pediatric Vaccines
Bavarian Nordic's Chaplin says the company isn't developing a maternal RSV vaccine. But the company is working on a pediatric shot. Moderna also is working on a pediatric shot in early-stage testing.
Like the maternal vaccines, however, specific safety considerations surround vaccinating young children. Also, the dosage often is different because children weigh less.
"Pediatric development is a lot more complicated from a regulatory standpoint," Chaplin said. "There are real safety concerns about going into young babies."
After wrapping studies in older adults, Bavarian Nordic plans pediatric studies that use what it learned about the safety and effectiveness of its RSV vaccine. Older adults tend to get sicker when encountering RSV, experts say. That's because the virus often stirs up comorbidities. In fact, 94% of adults hospitalized due to RSV have underlying medical conditions, according to the CDC.
Doctors generally associate RSV with children. The reason is children shed a lot of the virus when they're sick. So, tests can easily detect RSV. It wasn't until more recently that testing measures became sensitive enough to easily detect RSV in adults, says GSK's Dormitzer.
"The disease triggered by RSV is less stereotypical in adults," he said. "It can manifest in a lot of different ways."
Pfizer notes more than 177,000 older adults in the U.S. end up hospitalized for RSV each year. Of those, about 14,000 die.
A Big Market For RSV Vaccines
For that reason, analysts see the market for adult RSV vaccines becoming significantly larger than the maternal or even pediatric markets.
But the jury is still out on whether multiple companies will have products in this space or whether it will be a duopoly featuring Pfizer and GSK. Moderna stands a good chance of making a dent in the 2024 government contracting season, said Mani Foroohar, another SVB Securities analyst, after the company put out its final-phase results in mid-January. Bavarian Nordic and J&J are also in the running.
A key consideration to the market size will be how often people need boosters. That's a tough question in vaccine development — as the world learned during the Covid pandemic. Fortunately, this virus is what experts consider "stable." It doesn't mutate as rapidly as the viruses that cause Covid or influenza.
"You can track flu and Covid changes by months," Dormitzer said. Viruses like HIV and hepatitis C? They mutate so rapidly that scientists can't figure out how to inoculate against them. RSV stands apart, with two strains called A and B. Vaccines designed to prevent RSV A also show promise against B.
"Why is RSV so much more stable?" he said. "We don't know the answer."
Pharmaceutical Stocks: At Least A Year Of Protection
The companies behind pharmaceutical stocks expect the leading crop of RSV vaccines to provide at least one year of protection. Recipients of J&J's vaccine still have elevated antibodies after two years. Bavarian Nordic hopes it can deliver several years of protection against the virus.
But all of this takes time. Pfizer is running its study for two seasons. GSK is following shot recipients for three. J&J's study is ongoing with two RSV seasons already recorded.
In the meantime, investors in pharmaceutical stocks are waiting for two events in 2023. The FDA will make its decisions on Pfizer's and GSK's RSV vaccines in May. The following month, the CDC's Advisory Committee on Immunization Practices will make its recommendations.
Bavarian Nordic hopes to have its Phase 3 results this year, with Johnson & Johnson likely to trail in the second half of 2024. Analysts expect Moderna to soon file for approval of its RSV vaccine in the U.S. But SVB's Risinger says it's still not clear who will lead the pack.
"It is unclear whether this will be a pneumococcal- or Covid-like duopoly with a few blockbuster products, or if each company will have to make do with a relatively small (about $1 billion) share," he said.
As Successful As Covid Vaccines?
Morningstar Equity analyst Damien Conover doesn't expect the RSV vaccines to be as wildly successful, from a sales point, as the Covid vaccines.
"But they don't need to be," he told IBD.
He points to GSK's shingles vaccine, Shingrix. Analysts of pharmaceutical stocks expect Shingrix to bring in nearly $3.5 billion in sales this year.
"Shingrix is going to annualize in a couple of years close to ($7.37 billion)," he said. "It's a very effective vaccine that didn't have any concern making a large market. I don't think Shingrix or the RSV vaccines will get to the same (revenue) level as the Covid vaccines. But they don't need to."
This story has been updated to reflect a correction in the name of Sanofi and AstraZeneca's RSV treatment.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
