I’ve been speaking with a sophisticated biotech hedge fund and have been learning a lot about the Covid-19 vaccines coming to market, all based on publicly available data.
The first assumption is that it does not seem like there will be much profitability made during the Pandemic stage of the virus; many of the vaccine makers are indicating they will underprice the vaccine in order to solve the crisis. That means that real vaccine profits will be seen after the Pandemic is over and when we are in an Endemic stage where people are taking seasonal Covid-19 vaccines.
The second assumption is that, although the market dynamics for a Covid-19 vaccine are still unknown, vaccines should win market share based on effectiveness and cost but also compliance, usage, and ease of distribution.
In that sense, Pfizer / BioNTech ($PFE, $BNTX) and Moderna’s ($MRNA) vaccines may not be the best solution once competing vaccines come out. They need to be stored at very cold temperatures, require second doses 3-4 weeks after the first ones, and will be the most painful vaccines seen on the market. One would think that compliance and adoption will be low for these, so one should consider this before buying into $PFE, $BNTX, or $MRNA.
Through this education, I am also increasingly convinced about the asymmetric upside of a certain Covid-19 biotech stock, which I have already put on the Big Board for ROIC members. It will be a 1-3 year thesis, but the upside could be immense if right. But fair warning is that like all premarket biotech investments, the returns here are binary – either you make multiples on your money on the upside or you can lose the majority of your investment if wrong.
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Some of you remember that when Tattooed Chef ($TTCF) became public via SPAC at $10, I did a quick look at it and thought it was generally favorable, but only in small size for the fun, speculative, gambling portion of a portfolio. Since then we’ve seen nice little gains on the fun bet.
But this morning I have just read a brand new research piece by a hedge fund I respect on $TTCF, and it’s very convincing that the stock is overvalued. In fact, this hedge fund is short the stock and this report has tanked the stock about 6.5% today. I will make this report available for ROIC members under Downloads.
I’m officially taking it off the board and my current opinion is that it is a sell and doesn’t belong in any portfolio, even a betting one.