MOHAMMED NALLA: mRNA is no one-trick pony

I am often one to look for silver linings around the darkest clouds. That’s because in the world of investments it is often from adversity that the largest opportunities present themselves.

The global pandemic has been a very dark cloud. Yet, as the vaccine rollout gathers momentum, the sun is peeking out from behind it.

Much of the success of some of the most effective vaccines against Corona has been due to the deployment and utilisation of mRNA technology. The name is an acronym for "messenger ribonucleic acid". It differs from conventional vaccines, and potentially represents a new age of immunology.

The antivaxxers may lament the speed at which a Covid vaccine was developed, but many overlook the fact that this pioneering technology has been researched for almost 50 years.

It has become the means for Pfizer, BioNTech and Moderna to be market superstars.

Yet the technology is anything but an overnight success. Rather, it was the product of considerable time and investment, as well as of failure, before finally becoming a biological and economic accomplishment. In fact, Katalin Karikó, widely credited for inventing what has grown into today’s mRNA technology, was demoted during her early career in the 1990s for failing to obtain grant approvals for her mRNA research.

So what is mRNA, and why is it so different?

Conventional vaccines introduce a small but manageable dose of a virus into our system. This allows the body to generate an immune response as it learns to fight the virus. But mRNA technology is premised on identifying the spike protein of the virus. It then trains the body to identify this protein and destroy it, effectively allowing for an immune response without the introduction of the virus into the system.

Despite the years of research, commercialisation of the technology was slow. The possibility of applying it to seasonal flu was behind Pfizer’s decision to partner with BioNTech. Other practical applications were all in development, but were hindered by the lack of commercially viable scale of production and prohibitively expensive research and development. mRNA was on the bleeding edge of innovation.

The level of scepticism about it ran so high that a few years ago Moderna was being compared with failed startup Theranos for its lack of published research and secrecy. Moderna survived largely on venture capital, philanthropy and the largesse of the US defence department’s research and development agency Darpa, which wanted to develop capabilities against a flu pandemic.

While the clouds of Covid have been too dark to contemplate, the silver lining is that it was enough to shake off the lethargy of the research and drug approval process. Once the scientists saw the genetic sequence of the Covid virus, which was published following the outbreak, it was just a matter of time. The code in the mRNA vaccine could be replaced and the vaccine could be repurposed.

While the early stages of this technology were prohibitively expensive, the pandemic has meant that investment in production facilities went into overdrive to achieve much-needed economies of scale. It has potentially unlocked a new future of hope for how we treat diseases that have thus far eluded conventional technologies.

Being in the mainstream has also meant that the trickle of research and development and investment in production has turned into a wall of money, which does a lot to dust off the old research and spur future development. There is already an accelerated development of an HIV vaccine to testing phase. There is even talk of using mRNA to develop patient-tailored cancer treatments in time.

But when you have a hammer, everything tends to look like a nail. mRNA will likely not be the silver bullet for all our maladies. But for now, it is riding high on a wave of optimism.

Financial market acceptance is a different story altogether, however. Since the start of the year, Moderna (it’s apt that its stock code is MRNA) is up 243%. Pfizer has lagged at 33%, while BioNTech rose 306%.

This really looks like a "new kids on the block" syndrome. Pfizer, established in 1849, has been astute in partnering for the vaccine with BioNTech (which was founded in 2008). Moderna, relatively unknown until last year, was founded in 2010. Pfizer and Moderna both turned to profitability only recently owing to the Covid windfall. Both have little to no debt, providing significant room for further investment and growth.

That said, when your share price starts to look like the spike protein you are targeting, investors would be cautious to do their due diligence. Is mRNA a one-trick pony, or are we building out an equestrian estate? While I would be hesitant at current prices, I think the long-term trajectory for mRNA and biotech as a whole is an exciting one.

Nalla, CFA, is a strategist at Moe-Knows.com