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Pharma investors scoff at Covid vaccine patent waiver: ‘We are not convinced’

Fund managers holding healthcare and pharmaceutical stocks have questioned the US government’s decision to support a waiver on Covid vaccine patents, claiming the move is unlikely to significantly boost vaccine production and could undermine faith in intellectual property law.

The US said on 5 May it would support a temporary suspension of intellectual property rights for Covid 19 vaccines, a suggestion which was tabled by India and South Africa within the World Trade Organisation last year.

The announcement by the US prompted a slide in some pharma stocks, with Moderna’s and BioNTech’s share prices slumping by as much as 9% and 15% respectively during early trading on 6 May.

The US government claimed a waiver on intellectual property rights would increase supply of the vaccine, if pharmaceutical companies were able to produce their own versions without the threat of being sued by existing manufacturers.

However, fund managers focused on the healthcare and pharmaceutical sectors are sceptical.

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“We are not convinced that allowing a waiver for patents related to the Covid vaccines would dramatically increase production,” said Vinay Thapar, manager of the AllianceBernstein International Healthcare Portfolio, which holds Pfizer among its top 10 holdings.

“In addition to IP, raw materials need to be secured — of which there is currently a shortage — specialized manufacturing facilities need to be constructed [or] scaled up, and there is technical knowledge required in manufacturing mRNA vaccines.”

Agustin Mohedas, a biotech stocks research analyst at Janus Henderson is also not convinced the waiver will have an impact on global supply.

Janus Henderson’s $4.2bn Global Life Sciences fund has AstraZeneca as its second largest holding.

“A patent waiver would not boost vaccine production today,” said Mohedas.

“Production is currently limited by facilities and people capable of producing vaccines and raw materials, which a patent waiver will not and cannot address,” he said.

“Waiving patent rights will not help populations in need around the world get the vaccine any faster. This would require key supplies and expertise that generic companies simply do not possess.”

Mohedas added there could be “long-term negative implications” of waiving intellectual property rights for Covid vaccines, such as investors in the pharmaceutical and biotech sector having “less faith in IP law”.

Mohedas said this might lead to investors assigning higher risk to an already risky sector, which “could reduce investments and thus result in fewer new drugs and vaccines to treat and prevent disease.”

However AllianceBernstein’s Thapar, whose fund holds 29% of its assets in pharma stocks, said the move by the US government was not a “significant threat” to the drug sector.

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“The US was quite clear that they view this as an extraordinary event and acknowledge that that timelines for waiving IP will be long and negotiations will be difficult,” he said

US support for a vaccine waiver has caught the attention of the European Commission.

Ursula von der Leyen, president of the commission, said on 6 May said the EU is “ready to discuss” the patent waiver. However, Germany has rejected the idea, claiming patents were not posing any challenges to vaccine prodution.

Rudi Van Den Eynde, head of thematic global equity at Candriam, said Covid vaccine production was much more complex compared to other drugs.

“To give low income countries speedy access to good vaccines, established innovative manufacturers will need to make a notable contribution and they should therefore be allowed to have a reasonable return on their significant investments,” said Van Den Eynde.

“These investments are made at a huge risk given what will be an uncertain Covid-19 vaccine market over the next couple of years.”

To contact the author of this story with feedback or news, email David Ricketts

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