CureVac Is Incredibly Overvalued And Perfectly Captures The Insanity Of The U.S. Stock Market In 2020

CureVac shares rose 250% in their first trading day Friday, bringing the company’s market value to an astonishing $12 billion during the heat of Friday’s post-IPO trading.  I describe that value as astonishing because the company recorded revenues of $3.1 million, down slightly year-on-year, in its most recently reported quarter, ending March 31st.  It is 2020, isn’t it?

Though not evident in its stock market valuation, the truth remains that CureVac is materially behind other MRNA companies in the race to market a vaccine for COVID-19.  CureVac’s Covid-19 vaccine candidate, which—as per the company’s IPO prospectus—does not even have a name as of yet, just entered Phase 1 trials in June, and with a Phase 2b/3 trial tentatively scheduled to be initiated in the fourth quarter of 2020. 

CureVac has two other named programs—CV 8102 and CV7102—both in Phase 1 trials, for rabies and for tumor monotherapy, respectively.  So, we residents of planet Earth could all breathe a sigh of relief if CureVac didn’t have such an amazingly consistent record of failure.  CureVac’s IPO prospectus reads like a failing child’s report card.  For instance:

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For example, our Phase 2b clinical trial with CV9104, one of our first generation vaccines based on protamine formulation, that was designed to evaluate the investigational mRNA-based cancer vaccine in patients with asymptomatic or minimally symptomatic metastatic castrate resistant prostate cancer, failed to meet the primary endpoint of improving overall survival despite proceeding through preclinical and Phase 1 studies. … In addition, our past programs with protamine based vaccines (CV9201, CV9103, CV9104 and CV7201) were discontinued because the level of immunogenicity achieved in clinical trials was considered insufficient

It’s not as if no one else has noticed, either.  In June 2020 Eli Lilly terminated its exclusive agreement to develop cancer vaccines with CureVac, which had been initially signed in November 2017.  In 2017 CureVac received an upfront payment 0f €50 million and an equity investment of $45 million from Lilly, but that relationship has been effectively ended.  Lilly has no further payment liabilities to CureVac and all licenses granted to Lilly have been terminated.

The media has been full of reports linking CureVac with Bill Gates, but, in fact, the Bill and Melinda Gates Foundation only made one $40 million investment in CureVac, in 2015.  The real mover and shaker at CureVac is Dietmar Hopp, one of the founders of SAP.  Via his investment vehicle, dievini, Mr. Hopp controls 49% of CureVac’s post-IPO shares with German state-owned development bank KfW owning another 17% and Glaxo owning 8%. 

Some three-quarters of CureVac shares could be reasonably assumed to be unavailable for trading on any given day, and moves like the stock’s post-IPO gain of 250% in one day are not shocking.  Whether a company that generated $3 million in revenues in the first quarter of 2020 should be worth $14 billion is a completely different calculation. 

CureVac has worked with Arcturus Therapeutics, a company I covered in this Forbes article, in the past. CureVac also has relationships with Boehringer Ingelheim, Genmab, significant shareholder Glaxo and, because it is 2020, with Tesla Grohmann.  Tesla Grohmann is a wholly-owned subsidiary of Musk’s company that has a contract to develop machines for CureVac but, according to the prospectus, has not delivered a single machine in the 5 years since the contract signing. 

Yes, it’s 2020.  Tesla is worth $350 billion and CureVac, with $3 million in revenues in its most recent quarter but the promise of an MRNA solution to the Covid-19 crisis, was worth $14 billion at its peak in Monday trading.  But CureVac may actually be moving away from a Covid vaccine, not towards one. Arcturus—which is a shareholding of my firm—clearly sees its relationship with CureVac fraying (from the CureVac prospectus):  we have not accepted the irrevocable offer with respect to any target and therefore have not paid any acceptance fees or made any milestone or royalty payments to Arcturus. Also CureVac’s IPO has effectively shunted the Gates Foundation into very small shareholder status.  

So, instead, CureVac has cast its lot with the Center for Epidemic Preparedness Innovations (CEPI.)  CEPI, also supported by the Bill and Melinda Gates Foundation, is just the sort of non-governmental organization that will give CureVac maximum cover while it attempts to finally reach an endpoint in a study, in this case its Covid-19 trials. 

Yes, as I keep mentioning, it’s 2020.  So, capital from individual investors is replaced with floods of money paid by the world’s taxpayers. It’s exactly the wrong direction for CVAC shareholders and it will end in tears, I am firmly convinced.  Bill Gates, Dietmar Hopp and Elon Musk are certainly titans of industry, but with Eli Lilly terminating its agreement, CureVac’s largest source of operational funding is now CEPI, an organization that in addition to the Gates Foundation now counts the following among its shareholders:

Wellcome Trust, the European Commission, and the governments of Australia, Belgium, Canada, Denmark, Ethiopia, Germany, Japan, Mexico, Norway and the United Kingdom.

Yikes.  Let’s all sing Kumbaya, but let’s not forget about the virtues of capitalism and Adam Smith’s Invisible Hand, either.  I will stick with Arcturus and leave the CureVac to the stock-pushers on CNBC and let them buy the world a Coke, sing in perfect harmony and pay a $10 billion valuation for an MRNA formulation that may or may not prevent Covid-19.

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