[ExI] From Covid to Cancer: How Moderna’s Stock Jumped 177% in a Day

[John Clark]

On Thu, Aug 20, 2026 at 10:12 AM <spike at rainier66.com> wrote:

*>> …The company’s fortunes cratered as demand for Covid-19 vaccines
>> plummeted. …*
>
>
>
> *> Wait what?  Why did the demand for c-19 vaccines plummet?  *
>


*ME: From a strictly economic point of view, how would investing in vaccine
research by a biotechnology company compare to investing in drug research?*

*GROK: " **From a strictly economic perspective, investing in vaccines is
generally less attractive for a biotechnology company than investing in
therapeutic drugs (especially chronic or specialty drugs like those in
oncology, rare diseases, or other high-value areas), primarily due to lower
expected revenues, pricing constraints, limited repeat purchases, and
weaker private returns relative to social value—despite often higher
clinical success rates and comparable (or sometimes lower) development
costs.*
Key Economic Differences

*1. Revenue potential and market structure*

   - *Vaccines are typically preventative*, durable goods administered once
   or a few times (or seasonally). This limits lifetime revenue per patient.
   Drugs, especially for chronic conditions, generate recurring sales over
   years.
   - Historical data illustrate the gap: in the early 2000s, global
   therapeutic drug sales exceeded $300 billion while vaccine sales were ~$5
   billion. Vaccines have long represented only a small share (~3%) of the
   overall medicines market (pre-COVID). Even post-COVID, non-COVID vaccine
   markets remain concentrated among a few large players with limited
   blockbuster opportunities compared to oncology or specialty drugs.
   - Economic models show that for many diseases (especially those with
   heterogeneous risk, like HIV), a monopolist can extract more surplus from a
   drug (sold after infection is realized) than from a vaccine (sold before,
   when private risk information differs). Calibrations suggest drug revenues
   can be 2–4× higher than vaccine revenues for the same disease. For rare
   diseases or multi-cohort populations under routine immunization, vaccine
   revenues from one annual cohort can fall well short of treatment revenues.
   - COVID-19 was an exception that produced a temporary revenue windfall
   (tens of billions), but *it was pandemic-driven and not representative
   of steady-state economics*.

*2. Pricing power and buyer dynamics*

   - Vaccines face strong downward pressure from governments, public health
   agencies, UNICEF, and bulk procurement. They are often viewed as public
   goods, leading to lower prices that do not fully capture externalities
   (herd immunity, reduced transmission, avoided downstream costs).
   - Drugs (especially patented specialty or orphan drugs) command much
   higher prices, supported by willingness-to-pay from insurers, patients, and
   value-based pricing in chronic/high-severity indications. Modeled
   comparisons show economically justifiable vaccine prices can be only a
   fraction (e.g., ~6%) of equivalent treatment prices in some scenarios.

*3. Development costs, timelines, and success rates*

   - Capitalized development costs are broadly comparable: recent estimates
   put novel vaccine development at roughly $0.9 billion on average (to U.S.
   market, ~10 years), while new drugs often fall in the $1–3 billion range
   (risk-adjusted, including failures). Vaccines may require larger trials in
   healthy populations and stricter safety standards, but overall costs are
   not dramatically higher.
   - *Success rates favor vaccines.* Industry-sponsored vaccine programs
   have historically shown substantially higher probabilities of approval
   (e.g., ~33–40% from clinical stages in multi-decade analyses) versus
   general drugs (~6–10% overall, lower in areas like oncology). This reduces
   the cost of failures relative to many therapeutic pipelines.
   - Manufacturing for vaccines (especially biologics) can involve higher
   fixed costs, specialized facilities, and process controls, which raises the
   break-even volume.

*4. Profitability, margins, and investment flows*

   - Contribution margins can be similar, but absolute profits and ROIC
   tend to be lower for vaccines due to volume/price constraints and less
   recurring revenue. Big Pharma and biotech have historically allocated far
   more R&D and venture capital to therapeutics (e.g., cancer drugs received
   ~12× the VC of infectious-disease vaccines over a recent decade). Only a
   minority of top firms maintain significant vaccine programs.
   - Vaccines generate large positive externalities that private companies
   cannot fully monetize, creating a classic underinvestment problem relative
   to social value. Drugs more readily allow private appropriation of value.

*5. Risk and portfolio considerations*

   - Vaccines can offer more predictable technical success but higher
   commercial/policy risk (procurement decisions, pricing negotiations,
   pandemic vs. endemic demand volatility).
   - Therapeutics (especially high-price specialty drugs) offer larger
   upside in successful cases and better alignment with private investor
   incentives, even if technical attrition is higher. Portfolio approaches or
   public-private partnerships are often needed to make vaccine R&D viable at
   scale.

Bottom Line for a Biotech Investor

Purely on expected private economic returns (NPV, IRR, risk-adjusted),
*drugs—particularly
chronic, specialty, oncology, or rare-disease therapeutics—typically
dominate vaccines*. Vaccines can be viable or even highly profitable in
specific cases (high-prevalence diseases with catch-up campaigns, strong
government commitments, platform technologies like mRNA that enable
follow-on products, or pandemic scenarios), but the baseline incentive
structure favors treatments that patients take repeatedly at higher prices.
This is why vaccine R&D has historically lagged despite favorable science
and success rates, and why policy tools (advance market commitments, higher
valuation of externalities, catch-up campaigns, or larger public rewards)
are often proposed to close the gap."

********

*ME: S**o would it be correct to say that investing in vaccine research
might be a "common good" that government could do better at providing than
the free market?*


*GROK: " **Yes, that is a standard and largely correct economic framing.*

Vaccines (especially those against infectious diseases with significant
transmission externalities) have* classic features of a public good or a
good with large positive externalities*:

   - Private companies capture only a fraction of the total social value.
   Herd immunity, reduced transmission, avoided hospitalizations, productivity
   gains, and lower mortality benefit people who never buy or take the
   vaccine. Private returns therefore systematically understate social returns.
   - Demand is lumpy and often low in non-crisis periods (routine
   immunization of healthy people, or preparation for rare/emerging
   pathogens). This weakens the commercial case relative to chronic or
   high-price therapeutic drugs that generate recurring revenue from sick
   patients.
   - Development involves high fixed costs, long timelines, scientific
   risk, and (for many vaccines) large trials in healthy populations, while
   pricing power is constrained by governments and public purchasers.

*As a result, pure free-market incentives tend to produce underinvestment
relative to the socially optimal level of R&D—exactly the pattern observed
historically (far more private capital flowing into oncology, rare
diseases, and chronic therapeutics than into preventive vaccines for
infectious diseases)*. This is why economists and public-health analysts
have long argued that government (or government-backed mechanisms) has a
comparative advantage in funding, de-risking, or guaranteeing markets for
vaccine research that the private sector alone will undersupply.

Common policy responses that flow from this analysis include:

   - Direct public funding of basic and translational research (NIH, BARDA,
   etc.).
   - Advance market commitments, prizes, or procurement guarantees that
   create demand certainty.
   - Public–private partnerships that share risk and reward.
   - Stockpiling or “push” incentives for platform technologies useful
   against emerging threats.

None of this implies that private firms should not develop or manufacture
vaccines, or that government always executes the role well. Private firms
remain essential for later-stage development, manufacturing scale-up, and
innovation. Government involvement can also introduce its own
inefficiencies, political priorities, or abrupt policy shifts (as seen in
the 2025 BARDA mRNA contract terminations). The economic claim is narrower
and more robust: because of externalities and the resulting private
underinvestment, a pure free-market equilibrium will typically produce too
little vaccine research from society’s point of view, so some form of
collective (often governmental) investment or market-shaping is justified
on efficiency grounds.

In short, treating substantial parts of vaccine R&D—particularly for
infectious-disease prevention and pandemic preparedness—as a common-good
activity that government can productively supplement or lead is consistent
with mainstream economic analysis of externalities and public goods."


********


*ME: Did President Trump recently cancel some research contracts on mRNA
vaccines?*


*GROK: "**Yes.* In August 2025, the U.S. Department of Health and Human
Services (HHS), under Secretary Robert F. Kennedy Jr. during *the Trump
administration, announced a coordinated wind-down of mRNA vaccine
development* activities funded through the Biomedical Advanced Research and
Development Authority (BARDA). This included the cancellation or de-scoping
of various contracts and solicitations.

Key details from the official HHS announcement and contemporaneous
reporting:

   - *Scope*: I*t affected 22 mRNA vaccine development projects/investments
   totaling nearly $500 million*. This included terminating contracts with
   entities such as Emory University and Tiba Biotech; de-scoping work in
   contracts with Luminary Labs, ModeX, and Seqirus; rejecting or canceling
   multiple pre-award solicitations (including proposals involving Pfizer,
   Sanofi Pasteur, CSL Seqirus, Gritstone, and others); and restructuring
   certain Department of Defense collaborations involving nucleic acid-based
   projects with partners such as Moderna/UTMB, AstraZeneca, and others.
   - *Rationale given by HHS/RFK Jr.*: After a review of investments from
   the COVID-19 era, officials stated that the data showed these vaccines
   “fail to protect effectively against upper respiratory infections like
   COVID and flu,” and funding would shift toward what they described as
   safer, broader platforms (e.g., whole-virus vaccines) that remain effective
   as viruses mutate. Some final-stage contracts were allowed to continue to
   preserve prior investments, and no new mRNA-based projects would be started
   under BARDA. Other non-vaccine uses of mRNA technology within HHS were not
   affected.
   - *Context*: This followed an earlier (May 2025) cancellation of a large
   (~$590 million) BARDA contract with Moderna for an H5N1 (bird flu) mRNA
   vaccine candidate. The moves occurred amid broader policy shifts on
   vaccines under the administration.

Note that while HHS/BARDA funding for these mRNA vaccine projects was
terminated, some related research (e.g., certain Department of Defense
efforts) continued in limited form, and the decision drew significant
criticism from many infectious-disease experts who view mRNA platforms as
important for rapid pandemic response. The official HHS press release
remains the primary source for the precise scope of the cancellations."

* John K Clark*
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.extropy.org/pipermail/extropy-chat/attachments/20260820/436be1ec/attachment-0001.htm>