Cryoport: Comments on the Sharp Recent Price Swings (CRYX, $51.86, Buy)
Cryoport's stock has been on a roller coaster ride over the past ten days as shown in daily closing prices below:
- November 6 $45.69
- November 12 $60.31
- November 13 $59.00
- November 16, current $51.86
I think that this price action centers around the market’s perception of the degree of involvement that Cryoport will have in vaccine development for COVID-19. In early November, the success of the Pfizer/ BioNTech vaccine apparently was a major reason for the move to $60.31. This vaccine must be shipped and stored at minus 70 degrees Celsius (minus 94 degrees Fahrenheit) or lower. While this is very cold, cryogenic shipping is at minus 150 Celsius. Market participants incorrectly may have thought that the Pfizer and BioNTech vaccine would use Cryoport’s cryogenic logistics services. In actuality, it can be shipped using dry ice and Pfizer has developed its own temperature controlled shipping solution based on dry ice. The need for storage at minus 70 degrees will create demand for freezers that can maintain this temperature. Here, Cryoport will benefit through the recently acquired MVE Biologicals which is a leading producer of such freezers.
Today it was announced that the Moderna COVID vaccine in its phase 3 trial had achieved an effectiveness of 94% which was slightly better than 90% for Pfizer and BioNTech. From a statistical standpoint, they are equally effective This is extremely positive for global health. Both vaccines use messenger RNA technology which is a cutting edge technology that has not previously been used in any commercial vaccine and both vaccines target epitopes (molecular targets) on the Spike protein that is found on the surface of the Covid virus. The success of both vaccines validates the technology and the effectiveness of the vaccines through targeting the Spike protein. The world now has two successful vaccines for COVID and more vaccines using different technologies to target the Spike protein are not far behind.
The market today focused on the characteristics of the Moderna vaccine which can be shipped and stored at minus 20 degrees Celsius (minus 4 degrees Fahrenheit) and is stable for 30 days between 2 degrees to 8 degrees Celsius (36 degrees to 46 degrees Fahrenheit). The market seems to have focused on the better temperature range characteristic of the Moderna vaccine and Moderna traded up sharply while Pfizer and BioNTech traded down meaningfully. The market reaction is consistent with saying that this is a zero sums game so that the superior shipping and storage characteristics of the Moderna vaccine will allow it to dominate the market.
Let’s think about this. There are 330 million Americans, 750 million Europeans and over 7 billion people worldwide, a high percentage of whom will need these vaccines. Because the effectiveness of the vaccines is comparable, doctors and patients will be indifferent to which vaccine is used. Pfizer may have to bear the cost of the colder refrigeration required for storage, but as long as Pfizer absorbs this cost (which it almost certainly will) this doesn’t seem to be a competitive factor. In any event, I think that Pfizer/ BioNTech and Moderna will be able to sell every dose they can produce in 2021. Demand will far, far exceed supply and these two vaccines have an important first mover advantage as other vaccines are months or more behind.
The global infrastructure for vaccines will need enormous investments in shipping, logistics and storage at all temperature ranges. Cryoport though its acquisitions of Cryogene, CryoPDP and MVE Biologics has put together a worldwide business that will participate meaningfully in the substantial spending that will occur. How much so, I can’t really say but it should be meaningful.
From an investment standpoint. I think that the primary reason to own Cryoport for the long term is its dominant position in cryogenic shipping services and logistics. The near term trading around the COVID vaccines is probably not that meaningful to sales and earnings growth over a five year period. As I wrote in my recent note, we are just in the first inning of this long term growth story.
Cryoport: We Are Just in the First Inning (CYRX, Buy, $50.27)
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