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The role of small-caps life science companies in the race for a coronavirus vaccine

“The way that small, micro-cap companies can compete is innovation,” says Gabriele Cerrone, chairman of Tiziana Life Sciences, which is one of a handful of UK-listed R&D firms working on a Covid inoculation

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What they may lack in comparative size and funding, smaller companies make up in terms of innovation

If there is one piece of news the world is anxious to hear it is that we have a coronavirus vaccine.

The markets have been very responsive to fresh data on clinical trials or the announcements of new projects.

But investors may have noticed the chatter is mostly about the big pharma rather than the smaller innovators in the field.

So, giants such as GlaxoSmithKline PLC (LON:GSK), Moderna Inc (NASDAQ:MRNA), Novavax Inc (NASDAQ:NVAX), Johnson & Johnson (NYSE:JNJ) and Sanofi have dominated the headlines with their vaccine candidates.

Yet a host of up-and-coming drug developers, many based here in the UK, are also part of the race to find an inoculation.

And while they may track under the radar, the message is don’t count them out of what is turning into a marathon rather than a sprint to develop a best-in-class prophylactic.

“In general, vaccine development is a long, complex and costly business,” says Duncan Peyton, chief executive at 4D Pharma PLC (LON:DDDD).

“It is difficult to figure out whether the vaccine works and the number of patients you need in those trials is usually quite big, therefore they are really expensive.”

His company has fast-track clinical trial authorisation from the UK regulator to carry out a phase II assessment of its single-strain live biotherapeutic immune modulator MRx-4DP0004 in 90 people hospitalised with COVID-19.

Scancell Holdings PLC (LON:SCLP), meanwhile, has announced plans to investigate a potential formulation, while Frontier IP Group PLC’s (LON:FIPP) portfolio company The Vaccine Group is working on a jab for animals to prevent coronaviruses from infecting humans again.

It takes a while…

Only 10% of vaccine candidates make it to the commercialisation stage and they are normally in development for five or six years before being tested on humans.

After first identifying the right molecule to trigger a suitable immune response, known as an antigen, scientists then must then test and see whether the antigen is safe and functional on animals, usually mice or monkeys.

To gain approval, formulations then need to go through three phases of trials in humans.

The first phase, usually on 30-40 people, is to determine dosages and potential side effects, while the second phase moves on to a few hundred individuals to investigate efficacy.

The last stage confirms findings on thousands or tens of thousands of participants, as well as testing whether there are any side effects in certain segments of the population.

While it took five years after the Ebola outbreak in Africa before US giant Merck & Co (NYSE:MRK) received approval for its vaccine candidate, during this coronavirus pandemic regulators have allowed a number projects to pass through experimental stages far more quickly that would normally happen.

Meanwhile, several vaccines that are now being tested on humans have used existing formulations with a ‘coronavirus twist’.

…and it costs a lot

Companies and investors may wonder whether the money and effort are worth the returns; however, there is significant funding available from governments and charitable organisations.

Official figures say US$10bn so far has been poured into the search for a COVID-19 vaccine, although the real cost has been estimated as nearer US$25bn.

AstraZeneca PLC (LON:AZN), which is scaling up capacity to manufacture a candidate that is being tested by a consortium led by Oxford University, has pledged to produce jabs for no profit as long as costs are offset by government funds.

Thanks to their high profile and connections with the scientific community, the big pharma companies at the forefront of research find it easier to snap up such grants.

Smaller companies can not only struggle with getting projects off the ground, having to raise equity to fund the design of the initial genetic profile of the vaccine, but then applying for public funding once the first clinical data is out.

So, it’s hardly a level playing field.

Small caps provide innovation

But what they may lack in comparative size and funding, smaller companies make up in terms of innovation, which includes forming partnerships with their larger peers to scale up novel formulations, technologies and other ideas.

For example, 4D Pharma and Merck teamed up last year to work on vaccines for three undisclosed indications, using 4D Pharma’s live biotherapeutics knowledge.

“Our technology can enable their vaccine technology, so we wouldn’t be able to develop the vaccine by ourselves just for the cost of it,” Peyton told Proactive.

The same could happen with the immunotherapy platform developed by Scancell, if successfully adapted from its current oncology purpose to add functionality for infectious diseases.

“The only way that small, micro-cap companies can compete is innovation, so intellectual property in creating patterns and know-how… In my opinion it is the only competitive advantage,” said Gabriele Cerrone, chairman at Tiziana Life Sciences PLC (LON:TILS), which is also developing a treatment for coronavirus patients.

“If a small company has the financial wealth to bring the research forward they should do that, but because we are dealing with the emergency of a pandemic and the candidates need to be brought forward immediately, a lot of companies do not have the luxury to build the infrastructure for that disease, so they have to partner with the likes of AstraZeneca or GSK.”

What happens to the slower competitors in the race?

As of early June, there are currently 10 coronavirus vaccine candidates undergoing trials and another 126 in preclinical evaluation, according to a document published by the World Health Organisation.

If these statistics are right, around a dozen vaccines should make it to market – and they might all be needed, as a combination several formulations could be required to suit different sets of the population.

“If someone comes up with a vaccine, the question you’d have to ask is, is the virus seasonal? Vaccination for flu changes every year,” Peyton says.

The influenza virus is different each time, which requires different seasonal vaccines each year.

“If COVID becomes a seasonal virus we will have to develop different vaccinations each year,” he adds.

In other words, we’ll need a steady stream of innovative, new technology, which is likely to come from the market’s smaller players.

Quick facts: Tiziana Life Sciences PLC

Price: 111 GBX

Market: LSE
Market Cap: £216.02 m

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