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If you can’t beat them, join them: football and F1 team up with esports



Across the road from the Chelsea Football Club’s stadium in west London, the Gfinity Arena is the UK’s first dedicated esports arena. With three separate stages and seats for 240 spectators, it specialises in holding competitions for the world’s most popular video games such as League of Legends.

In late October, the arena hosted a very different event — a digital Formula One race that allows the drivers to rev their engines from home. With fans also prevented from attending by the pandemic, the venue had been turned into a production studio that allowed 20 drivers to compete in a virtual Grand Prix that was broadcast live on Sky, the dominant sports broadcaster in the UK. 

Popular sports such as football or Formula One once looked on esports as a parallel world — a niche form of entertainment that did not impinge on their own franchises. But they have watched anxiously as esports has grown rapidly into a formidable new force: one that is able to retain the attention of millennials and Generation Z — those born after 1995.

Now they are looking to get in on the act. F1, the global racing series owned by US billionaire John Malone’s Liberty Media and the organiser of the event at the Gfinity Arena, is among the established sports groups that are leading a charge into professional video gaming. They are competing for the next wave of consumers, who increasingly look to esports for their entertainment. 

At stake are potentially billions of dollars in broadcasting and sponsorship, generated by a growing global audience for competitive gaming. Roughly 443m people watched esports in 2019, a 12 per cent increase on 2018, according to data provider Newzoo, the large majority of whom are under the age of 35. Esports athletes’ exploits are streamed by Amazon’s Twitch and Google’s YouTube, among other platforms, direct to consumers’ phones.

Participants compete in the 2017 F1 Esports Pro Series at the GFinity Arena in London
Participants compete in the 2017 F1 Esports Pro Series at the Gfinity Arena in London © Joe Brady/Getty
Julian Tan, head of esports at F1, says: ‘The very core of why we’re doing this [expanding into esports] is really about reaching out to a younger audience’ © Youtube/Formula 1

The pandemic has given traditional sports an even greater incentive to tap the potential of esports. Not only has the absence of fans from stadiums damaged their business models and left them searching for new revenue, but broadcasters such as Sky, which have been deprived of many of the sporting events they usually rely on, have been eager for fresh content. 

“One of the biggest barriers to gaming going mainstream has been the reluctance of broadcasters to put it on air. Covid-19 and the lockdown blew this sentiment out of the water,” says John Clarke, chief executive of Gfinity. “If you are a sports rights holder, you have a choice. Embrace the gaming culture and find a way to play in it authentically, or watch your audience get older and older.”

That message is echoed by some of the most powerful players in traditional sports. Andrea Agnelli, president of the Italian football club Juventus and chair of the powerful European Club Association, which represents the continent’s top clubs, warned last year that the sport had to evolve in order to compete with video games such as Fortnite.

“If we are not progressive, we are simply protecting a system that is no longer there, a system that is made of domestic games that will have little interest for our kids,” he said. 

The International Olympic Committee has also established relationships with the esports and gaming industries and has raised the prospect of esports becoming part of the games in the future.

Fans cheer at the 2019 Fortnite World Cup in New York. aXiomatic was among investors, including private equity firm KKR, which injected $1.25bn into Epic Games, the creator of Fortnite
Fans cheer at the 2019 Fortnite World Cup in New York. aXiomatic was among the investors which injected $1.25bn into Epic Games, the creator of the game © Johannes Eisele/AFP via Getty

With many competitions temporarily brought to a halt by national lockdowns in March, some traditional sports instead began to stage virtual tournaments. 

F1 has held virtual Grands Prix featuring former drivers, including 2016 world champion Nico Rosberg, and celebrities such as Liam Payne, a former member of the band One Direction. The English Premier League, the richest domestic football competition in the world, held an esports tournament in April, which was won by Diogo Jota, the real-life striker who now plays for Liverpool. The National Basketball Association, the North American league, hosted its own competition for real players. 

Investment is also flooding into esports teams and leagues from wealthy former athletes.

Jakob Lund Kristensen, founder and chief commercial officer of Astralis, an esports team that floated on Nasdaq’s exchange for smaller companies in December 2019, disputes the perceived competition between sports and esports. Instead he sees a wider battle that also draws in video streaming companies such as Netflix and music platforms including Spotify.

“We’re all fighting for leisure time,” he says. “We went from having cooking shows to MasterChef, we went from having dancing shows to Dancing With the Stars. Everything pinnacles to something competitive.”

‘Investing in generational change’

David Beckham is among the group of sporting stars to have moved from the pitch to the business world. The former England and Manchester United footballer is a part-owner of Inter Miami, the Major League Soccer team, having negotiated an option to buy a franchise for $25m when he joined LA Galaxy as a player in 2007.

He is also a 5 per cent shareholder in Guild Esports, a London-based start-up company that floated on the London Stock Exchange in October, raising £20m to fund the recruitment of professional gamers and teams. 

Juventus FC President Andrea Agnell: 'If we are not progressive, we are simply protecting a system that is no longer there, a system that is made of domestic games that will have little interest for our kids'
Juventus FC president Andrea Agnelli: ‘If we are not progressive, we are simply protecting a system that is no longer there, a system that is made of domestic games that will have little interest for our kids’ © Miguel Medina/AFP via Getty
Players are seen on a TV screen during the 2019 Fortnite World Cup in New York. One of the problems for potential investors in esports is that it is hard to quantify the size of the market
Players are seen on a TV screen during the 2019 Fortnite World Cup in New York. One of the problems for potential investors in esports is that it is hard to quantify the size of the market © Johannes Eisele/AFP via Getty

“[Esports] is a sector I’ve been monitoring for a while,” he said in October. “We are committed to nurturing and encouraging youth talent through our academy systems . . . and we want to be the number one esports team in the business.”

Institutional investors also believe in the business. Soros Fund Management, the investment company of billionaire philanthropist George Soros, bought a 3.6 per stake in Guild.

Mr Beckham, is the face of the company. Under his “influencer” agreement, he will promote Guild on social media and the company can use his name to build a global following in a deal that could net the ex-player a minimum of £15.25m over five years.

“If you have the right pipeline of talent, that brings the tribal loyalty that you have within a team,” said Mr Beckham, explaining his role in the venture. 

The idea is that esports teams will build the same level of loyalty among viewers as traditional sports clubs enjoy from their fans to attract revenues from sponsorship, merchandising and broadcasting rights.

“This audience is an advertiser’s dream,” says Carleton Curtis, executive chairman of Guild. “It is by far the most concentrated composition of Gen Z and millennials that most brands these days are going after.”

Mr Beckham is far from the first former athlete to invest in esports. Michael Jordan, who became a global brand thanks to his exploits leading the Chicago Bulls to six NBA championships in the 1990s, has bought a stake in aXiomatic, which holds a variety of esports investments, including games publishers, teams and coaching businesses. 

David Beckham, the former England and Manchester United footballer, says of esports: ‘If you have the right pipeline of talent, that brings the tribal loyalty that you have within a [football] team’ © Lindsey Parnaby/AFP via Getty
Chicago Bulls’ Michael Jordan dunks the ball. The team's former star has bought a stake in aXiomatic, which holds a variety of esports investments
Michael Jordan during his heyday with the Chicago Bulls. The team’s former star has bought a stake in aXiomatic, which holds a variety of esports investments © John Swart/AP

Axiomatic’s backers also include Peter Guber, who co-owns the Los Angeles Dodgers baseball team and the Golden State Warriors in basketball, and billionaire Ted Leonsis, who owns the Washington Wizards, a rival NBA team, and the Capitals in the National Hockey League.

The company was among investors, including private equity firm KKR, which in 2018 injected $1.25bn into Epic Games, the creator of Fortnite. 

Still, revenues remain small compared to sport’s big leagues. Team Liquid’s revenues are in the “double-digit millions”, according to Victor Goossens, co-chief executive of the esports gaming team, who moved to South Korea after finishing high school in 2002, slept on floors and lived on $300 a month to compete professionally in the StarCraft video game. 

These days, Liquid is owned by aXiomatic. “To invest in esports. You need to be willing to look a little bit beyond just the fundamentals of a company,” Mr Goossens says. “To invest in esports is to invest in generational change.”

‘Humans are fickle sometimes’

According to F1, the average age of its fans is 40. Only 14 per cent are under the age of 25, with another 30 per cent coming from the 25-34 bracket. “The very core of why we’re doing this [expanding into esports] is really about reaching out to a younger audience,” says Julian Tan, head of esports at F1. “The reality is that the younger generation are spending more time gaming.”

F1 is “very strategically positioned to exploit certain elements like the blurring of lines with reality”, Mr Tan adds, pointing out that a small number of esports gamers have transitioned into real racing. That cohort includes Igor Fraga, who has raced in esports and in Formula 3, one of the stepping stones towards an F1 career.

In October, Fifa, football’s world governing body, outlined plans for esports competitions with $4.4m in prize money up for grabs to “engage deeper with football’s next generation”. The Premier League has continued to arrange virtual tournaments.

However, some investors are wary about the rush to invest in esports teams, questioning their ability to build loyalty.

Football players hold an exhibition match to promote a new version of the EA Sports Fifa video game in Hollywood, California
Football players hold an exhibition match to promote a new version of the EA Sports Fifa video game in Hollywood, California © Mark Ralston/AFP via Getty

Damir Becirovic of Index Ventures, the venture capital firm, says the real prize would be finding the next top game publisher and developer. In esports, unlike the real world, it is possible to own the game itself. “We want to back companies that have technology at the core [and] when we think about a team it’s really humans at the core,” he says. “Humans are fickle sometimes.”

Established sports have built their intense followings over decades, proving the investment case in teams and leagues. By contrast, Fortnite, for example, was released just over three years ago.

“Will fans permanently transfer their allegiance and their dollars to the virtual teams [or the players who compete in these tournaments]?” asked Nick Train, co-founder of UK fund manager Lindsell Train, a major shareholder in Manchester United and Juventus, in a note to investors in August. “No.”

Industry experts believe there is only limited potential in promoting esport versions of traditional sports.

According to Remer Rietkerk, head of esports at Newzoo, League of Legends, which is published by Riot Games, along with Counter-Strike: Global Offensive and Dota 2 — both the work of Seattle-based Valve — are the three most watched live competitive esports on YouTube and Twitch, with a combined 845m hours watched in 2019. Fifa 19 languished in 19th with just 8m hours, with Fifa 20 adding just another 3m. Those numbers exclude well over 1bn hours of views for non-competitive gaming.

“Fifa is a good game, many people play the game but no hardcore esports fan will tell you, ‘I’ve been watching Fifa for years’,” says Carlos Rodriguez, a former League of Legends gamer and founder of the G2 Esports team, which counts McLaren F1 racing chief Zak Brown as a shareholder.

“[Established sports teams] are used to buying LeBron James or Cristiano Ronaldo and automatically selling millions of jerseys,” he says. “They’re not used to having to relate to the people.”

Mike Sepso, the esports veteran and co-creator of Major League Gaming, which is now owned by gaming company Activision Blizzard, says that younger fans want different types of content that is more digital and usable on mobile phones. The reliance of sport on television broadcasting is “not going to satisfy the incoming demand . . . for more content,” he adds.

Yet, says Doug Harmer, a partner at Oakwell Sports Advisory, it would be a mistake for sports to forget the lessons of the pandemic and cut spending on digital gaming to cope with the economic downturn. He says one of the advantages for traditional sports of investing in digital gaming is that it allows organisations to collect data about their audience that they can use to attract commercial partners.

The basketball simulation video game NBA 2K21
The basketball simulation video game NBA 2K21 © 2K21
Diogo Jota, the real-life striker who now plays for Liverpool, won the English Premier League's esports tournament in April
Diogo Jota, the real-life striker who now plays for Liverpool, won the English Premier League’s esports tournament in April © Premier League

“I can definitely see a long-term rationale for keeping up with esports initiatives and the crossover [with] traditional sports . . . whether that actually happens now or not remains to be seen,” says Mr Harmer.

One of the problems for potential investors in esports is that it is hard to quantify the size of the market. Some analysts warn that there is an element of hype in some of the statistics that are sometimes used by boosters — such as the claim that League of Legends viewership is bigger than the Super Bowl. 

“That was the big, headline-grabbing stat but when you get down to it they were comparing the average audience of the Super Bowl in the US versus total unique viewers of League of Legends around the world,” says Nicole Pike, YouGov’s head of esports and gaming. “It’s just apples to oranges completely.”

Newzoo estimates esports’s annual revenues globally at $1bn, but that does not include revenue made by platforms such as Amazon’s Twitch and Google’s YouTube from streaming esports. It is also hard to distinguish publishers’ gaming revenues from esports revenues, making it difficult to properly assess the industry’s size. Esports insiders say some gaming companies run their competitive gaming activities as a marketing cost to sell more titles.

Nicolo Laurent, chief executive of Riot Games, says that traditional sports have been too slow to see the potential in esports. He likens it to the so-called “innovator’s dilemma”, a reference to the influential book by Clayton Christensen, who described the risk to incumbents from failing to recognise threats to their established products.

“The incumbent is a little bit arrogant towards the newcomer, the insurgent,” he says. “When you realise the insurgent is actually doing something great, it’s too late.”

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Investors look to Sunak for clarity on new UK infrastructure bank




Ever since chancellor Rishi Sunak announced the setting up of a UK government infrastructure bank last autumn, investors have wondered what its role will be. Next week, in the Budget, they will get the answer.

The Treasury has only said it will focus on supporting new technologies that are too risky for private finance and would contribute to meeting the government’s target of net zero carbon emissions by 2050. As examples, it gave carbon capture technology and the rollout of a nationwide network of electrical vehicle charging points. 

The selection process has just begun for a part-time chair, working two to three days a week, and it is scheduled to open on an interim basis on April 1.

The bank’s creation has prompted a debate about how infrastructure should be funded in the UK, at a time when the government’s finances are stretched and customers are likely to resist tax or bill increases, the means by which many sectors — such as ports, airports, energy, telecoms, water, and electricity — are funded. 

Many of these assets in England are owned by sovereign wealth, pension and private equity funds, and regulated by arm’s length bodies, under one of the most privatised infrastructure systems in the world.

The government’s finances have been stretched by the coronavirus pandemic, limiting funds for infrastructure projects such as rail © Niklas Halle’n/AFP

Dieter Helm, a utilities specialist at Oxford university, said the bank was “a good idea but it needs scale — a balance sheet and capital funding from the state, in which case you’ve essentially created a new arm of the Treasury”.

“The question is whether this is going to be the primary vehicle through which the government implements infrastructure,” he said. 

John Armitt, chair of the National Infrastructure Commission, a government advisory body, suggested it needed an initial £20bn over five years to make an impact and reach projects the market might be unwilling to support.

The institution, which Sunak has said will be based in the north of England as part of the government’s levelling up agenda, will partly replace the low-cost finance provided by the European Investment Bank, which is no longer available since Brexit. But it is unclear if it will be able to match the €118bn the EIB has lent to the UK since 1973.

Sunak has promised that the government, which spends much less than most European states on infrastructure, will spend £600bn over the next five years. But ministers hope that more than half their national infrastructure plan will be paid for by the private sector. However, private finance is generally more expensive than government borrowing and requires taxpayers to underwrite the construction and financial risks.

Infrastructure spending (as a % of total government expenditure) for Netherlands, UK and Germany. Also a band showing the min and max for all 31 European countries

“The government wants the public to believe that the country can have this wall of private sector investment without higher bills and taxes now but investors will only come if the government will guarantee they will receive a return and it acts as a backstop,” Helm said.

Dissatisfaction with UK infrastructure has been widespread for years: a CBI/Aecom survey in 2017 found that nearly three quarters of businesses were unhappy with facilities in their region.

The lockdowns have taken a heavy toll, for example forcing the renationalisation of rail services. At the same time the Eurostar train service, airports and airlines have called for taxpayer bailouts, while the government is also paying for some households’ broadband.

Although the prime minister has in the past year given the go-ahead to some rail and road schemes, including a tunnel under Stonehenge, other projects — including £1bn of rail improvements — have been axed. 

A road tunnel under Stonehenge is one of the infrastructure projects given the go-ahead © Matt Cardy/Getty Images

Meanwhile, local authorities — which are responsible for urban roads and other key infrastructure — have been forced to shift their limited financial resources to care for the elderly and vulnerable during the pandemic and so want more central government help.

Despite this growing demand, some investors have questioned the need for the new bank, even though they are popular elsewhere — such as Canada, which established one in 2017. 

“Given there is at least $200bn of international capital looking for projects in which they can invest, the government has to be careful it doesn’t just crowd out existing finance,” said Lawrence Slade, chief executive of the Global infrastructure Investor Association, which represents private sector investors.

He argued the new bank, which will take over the government’s guarantee scheme, should only take on projects that are “too risky” for institutional investors, pointing out that the Canada Infrastructure Bank was mandated to lose up to C$15bn (£8.45bn) over 10 years. “It’s not yet clear what question the new infrastructure bank is trying to answer,” he said.

Ted Frith, chief operating officer of GLIL Infrastructure, a £2.3bn fund backed by UK pension funds, said the EIB loaned money at competitive rates to projects that also borrowed from capital markets. “This is a global market and there are plenty of alternative sources of finance to replace the EIB,” he said. However, he added that the infrastructure bank could play a role in addressing the shortage of available projects.

While investors will put equity into existing or smaller infrastructure projects — such as an airport extension or a wind farm — they are wary of new projects, according to Richard Abadie, head of infrastructure at consultancy PwC, because the latter carry long term construction risks and do not provide an income stream for several years.

“The NIB can play a role de-risking projects but the main challenge is how we can afford and manage the cost of energy transition, not whether finance is available to bridge the cost,” he said.

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H&M experiments as it refashions stores after the pandemic




The Hennes & Mauritz flagship store on Stockholm’s main square is trying to break the mould. A woman sewing a patch on to trousers, party dresses for hire, a beauty salon and a personal shopping service is not standard fare for most fast-fashion outlets.

But it could be a taste of things to come as H&M, the world’s second-largest clothes retailer, works out what to do with its vast network of 5,000 stores after a pandemic that has increasingly pushed shoppers online. The Swedish chain is not just looking at services such as renting and repairing clothes, but on whether its shops can play a role in the logistics of online selling.

For Helena Helmersson, appointed last year as the first H&M chief executive outside the company’s founding Persson family, it is all about boosting relationships and engagement with customers.

“The physical store network that we have is one of our strengths. It’s the different roles the stores can play, the different formats. What kind of experiences are there in a store? Could they be part of an online supply chain? There are so many things to explore . . . it’s almost thrilling,” she told the Financial Times.

Helmersson, 47, has had a tough first year as chief executive. At the height of the first wave of the Covid-19 pandemic, four-fifths of H&M’s physical stores were closed and a big push online was unable to offset the hit. Sales fell a fifth in H&M’s financial year until the end of November to SKr187bn ($22.6bn), while pre-tax profits plunged 88 per cent to SKr1.2bn, interrupting a nascent recovery after years of decline.

Line chart of Ebit margins (%) showing H&M has lagged behind Inditex's profitability

Sales plunged in March and April, before rebounding strongly in the summer, and then getting hit again around Christmas.

But as the pandemic has forced H&M into speedier decision-making and increased flexibility and with Helmersson forecasting a wave of pent-up demand when Covid-19 comes under control, the chief executive is emboldened to say: “Overall, we will come out of the pandemic stronger.”

Boarded up H&M store in Minneapolis, Minnesota, US, in April 2020
With four-fifths of H&M’s stores closed at the height of the first wave, pre-tax profits plunged 88 per cent © Ariana Lindquist/Bloomberg

Anne Critchlow, analyst at Société Générale, said that relatively small increases in sales at H&M could lead to bigger rises in profits. “Potential recovery is part of the attraction of H&M to investors at the moment: it’s very highly operationally geared. H&M should be the fastest to recover,” she added.

But she argued that Inditex, the Spanish owner of Zara that overtook H&M as the world’s biggest fashion retailer by sales a decade ago, was a “better quality company”, and that the Swedish group may be a “bit slower” at returning to its pre-pandemic profit levels as some customers steer clear of its stores.

H&M’s shares fell consistently from 2015 to 2018, before largely treading water since then, although they have climbed 50 per cent since their Covid-19 low in March last year.

Helmersson, a H&M lifer who joined the retailer in 1997 as an economist, said she started to see “light at the end of the tunnel” after a “very demanding” period. “I have super-high expectations on myself. Adding a crisis on top of that, it’s been a really tough year.”

Now, however, her focus is moving to a critical question for H&M: “Where do we need to move faster?”

Line chart of Total sales growth (%) showing H&M's sales have kept pace with Inditex

Despite being in fast fashion, critics said H&M had become slow, outpaced by nimbler Inditex and online retailers such as Zalando and Asos. Inditex could get new clothes to Zara stores in weeks from nearby manufacturing sites in Europe while H&M, with more sourcing in Asia, took longer. Opening new stores gave the Swedish group an easy path to sales growth but did not help its profit margins, which have been declining consistently for the past decade.

Helmersson said H&M took “really, really fast decisions” at the start of the pandemic on how it bought garments, worked with its supply chain, and moved to selling more online. She pointed to how technology allowed designers, suppliers and the production office to work together at the same time to produce new clothes, rather than waiting for one to send a garment to another.

H&M’s rental service at a store in Stockholm, Sweden
It is ‘difficult to gauge how big’ trials such as clothes rental could become, said the H&M chief © DAVID THUNANDER

“It sounds really basic but if you do that in many processes you can be much faster. You also have data to give you more customer insight, which means you can act much quicker,” she said, adding that accessories can now go from conception to store in a few weeks, T-shirts in six weeks, and trousers in eight.

H&M is also trying to increase its speed on sustainability, bringing in a target of using 30 per cent recycled materials by 2025. Critchlow said that the group was leading the industry in its attempts to become circular, although many voice concerns over how much fast-fashion groups encourage excess consumption. Strong investor demand this month led to H&M reducing the interest rate for its maiden sustainability-linked bond, which was 7.6 times oversubscribed

Line chart of Share prices rebased showing Inditex has outperformed its rival over the past decade

Helmersson, a former head of sustainability at H&M, said that the hardest task for the retailer was decoupling its growth from its use of natural resources. She added that the trials in repairing and renting clothes as well as selling second-hand garments through the website Sellpy, in which H&M is the majority owner, were important but difficult to gauge how big they could become. “We have such a size that we can to some extent influence customer behaviour. But we will also see how willing they are,” she added.

Critchlow said H&M deserved “full credit” for the trials but that they were unlikely to lead to soaring profit margins. She added that the crucial questions were how fast H&M returned to pre-pandemic sales and profit levels and whether it could go further. “It requires H&M to manage the costs of the stores,” she said, adding that renegotiated leases during the pandemic had only helped a little.

There is also a debate about how much increasing online sales — expected to rise from 28 per cent of H&M’s total last year to about 43 per cent in 2025, according to Critchlow — help given that they come with additional costs such as delivery and returns as well as in logistics.

Helmersson is unbowed, arguing that H&M will offer multiple ways for customers to engage with the retailer through various store formats offering different services, online, and its own club. “The customer journey is constantly evolving,” she said. “We will follow, and influence. Before, it was about transactions, now it’s about relationships with customers.”

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How vaccine laggard CureVac hopes to come out on top




Fifteen years ago, after an hour-long meeting in the basement of a Paris hotel, Bill Gates agreed to back a German entrepreneur who claimed a new class of drug would revolutionise the fight against infectious diseases.

When Covid-19 shook the world last year, CureVac — the company built by Ingmar Hoerr with the help of the Microsoft founder’s money — seemed perfectly positioned to make good on that investment and produce a “best-in-class” vaccine.

It could be ready “by the autumn”, predicted European Commission president Ursula von der Leyen.

But while local rival BioNTech and US competitor Moderna brought to market vaccines using similar messenger RNA technology in less than a year, CureVac’s product is lagging up to six months behind.

Ingmar Hoerr, founder of CureVac © Imago images/ULMER Pressebildage

This is the story of how one of the most promising vaccine makers is trying to get back on track after development delays, the brain haemorrhage of its founder and a bizarre — possibly fictional — attempt by the White House to steal the company away from Germany.

‘America first’ again?

Following a meeting with pharma executives at the White House in early March, German media reported that the Trump administration had sought to lure the company, which also has a Boston base, to the US and secure its vaccine exclusively for Americans.

The news led to an uproar in Berlin, especially after billionaire Dietmar Hopp, CureVac’s lead investor, seemed to verify the reports in a magazine interview. 

Days later, CureVac’s American chief executive Daniel Menichella abruptly left the company, even though the biotech denied an official approach by the US government had ever taken place. The Trump administration also rubbished the reports — in one of the few public rebuttals by the former president’s staff against a reported “America first” policy stance.

Dietmar Hopp, lead investor of CureVac © Getty Images

Amid the turmoil, Hoerr, the company’s founder who had just taken over from Menichella as chief executive, suffered a brain haemorrhage in a hotel room, and relinquished the role again.

Venture capitalist Friedrich von Bohlen und Halbach, who sits on CureVac’s board, told the Financial Times that the Trump tale was probably “made up” by people leaping to conclusions about the presence of a German company at a US government event. 

But the reports were enough to spook European leaders. On March 16, von der Leyen spoke to CureVac’s management via video conference, and then publicly offered the 20-year-old company an €80m loan “to quickly scale up development and production of a vaccine”. 

By mid-June the German government had chosen to invest €300m in CureVac, for a 23 per cent stake, ahead of its flotation on the Nasdaq in August. Economy minister Peter Altmaier left little doubt as to Berlin’s motives: “Germany is not for sale, we don’t sell our silverware,” he told reporters.

Former US vice-president Mike Pence, centre, meets drugmakers last March © Eric Baradat/ Getty Images

Suggestions that CureVac’s investors may have spread the Trump tale to engineer a response from Angela Merkel’s government were strongly denied by people close to the company.

“It was not the plan to get German public money,” said von Bohlen, who first invested in the nascent company in 2004, and whose holding company, Dievini Hopp, created with Hopp, still owns half of CureVac. 

In any case, the company was unlikely to up sticks. When Hopp, a co-founder of tech group SAP, first agreed to invest roughly €2m in CureVac in 2005, he wanted to “make sure that we build infrastructure and new jobs here in Germany”, von Bohlen recalled.

Waiting for data

There was some rationale behind the German government’s investment, however. CureVac, which was developing a rabies vaccine when the Covid-19 crisis began, had more experience with infectious diseases than BioNTech. 

Some scientists also believed that CureVac, which unlike its rival does not chemically modify its mRNA, could end up prompting a stronger immune response.

But an initial readout from phase 1 trials in November damped the high expectations. The data showed that the level of antibodies produced by the vaccine was higher than the average in the blood samples of recovered Covid-19 patients, but appeared to be lower than those produced by the BioNTech and Moderna’s candidates.

However, as each company’s results were measured using different assays and against a different group of convalescent patients, they were not directly comparable, according to Suzanne van Voorthuizen, an analyst at Kempen. “You are always comparing apples with oranges,” she said.

The inconclusive data did not deter the European Commission, which signed a contract to secure 405m doses soon thereafter. Manufacturing deals with Germany’s Wacker Chemie and Rentschler followed in the next few weeks, as well as with France’s Fareva.

CureVac also raised $517m via a share offering and its shares trade more than six times last August’s IPO price. Twice in the last few weeks the company’s market value has surpassed that of Deutsche Bank and now stands at about €16bn.

Line chart of Rebased to Aug 2020 showing Vaccine makers' share prices

“In two years from now, nobody will care any more [about the delay],” said von Bohlen. “Capacity, quality and price — that is what everyone will care about,” he added, predicting that regular vaccinations would be required to protect against virus mutations and that CureVac’s mRNA technology would be ideally suited to that challenge.

An initial readout from large-scale phase 3 trials is expected in March, and although CureVac has given up on pursuing US authorisation, citing market saturation, approvals from the EU regulators will probably come halfway through 2021.

Competitive advantages

Being behind in the race to produce an mRNA Covid-19 vaccine could also end up being a blessing in disguise for CureVac, according to founder Hoerr, 52, who is recovering from his health crisis. He claims time spent perfecting the formulation of its candidate has given its product several competitive advantages.

Unlike vaccines by BioNTech and Pfizer, which currently have to be kept at an ultra-cold -70C while being shipped, and Moderna’s product, which must be kept at -20C, CureVac’s candidate is able to survive in standard fridge temperatures for at least three months, making it much easier to deliver to the developing world. “That’s not a miracle,” said Hoerr. “That is technology. You have to work on that.”

Additionally, at 12 micrograms per dose, it requires the smallest amount of active ingredient among the mRNA vaccines, enabling more efficient distribution.

Bar chart of Covid-19 shots under contract (doses bn) showing Vaccine makers race to supply the world

CureVac, which claims to be able to produce 300m doses this year and a further 1bn in 2022, spent extra time scaling up its manufacturing network.

The positive assessment is shared by pharma giant GlaxoSmithKline, which bought a 9 per cent stake in CureVac in July and earlier this month pledged a total of €150m to develop so-called “next-generation” Covid-19 vaccines with the company to tackle new variants.

The UK government has also agreed to provide CureVac with access to its genomic sequencing expertise. In exchange, the UK will receive 50m doses of the biotech’s jab and permission to use contract manufacturers to produce it in Britain.

“The UK is one of the most advanced countries in understanding mutations and sequencing them,” said Wassili Papas, a portfolio manager at German institutional investor Union, which has a small stake in CureVac. “So for them to choose CureVac, there must be something to it.”

CureVac’s ambitions were given its biggest boost to date in early January, when German pharma group Bayer agreed to help with the production and approval of the Covid-19 candidate — the first foray into vaccine development in the company’s 158-year history.

Bayer told the FT that the agreement was a “one-off” and that the company “just wanted to help”, denying suggestions that Merkel’s administration had pushed for the partnership.

Friedrich von Bohlen und Halbach
Venture capitalist Friedrich von Bohlen und Halbach sits on CureVac’s board © Andreas Riedel

The German government told the FT that it “explicitly does not exert any influence on the operating business of the company via its shareholding”, while von Bohlen said Berlin was first informed by the companies of the agreement after the deal was closed.

Nonetheless, in a government press conference last month, Armin Laschet, the newly elected head of Merkel’s party and the premier of North Rhine-Westphalia, which is home to Bayer, was clear about the deal’s significance.

“We need to recognise how important it is at this moment not to be completely reliant on the global market,” he said, “but also to be able to independently produce in Germany.”

Two weeks ago, CureVac began submitting approval data to the European regulator, and with the first batch of doses secured by the EU, the vaccine could also offer the bloc a chance to repair some of the political damage caused by the much-criticised procurement of the BioNTech and Oxford/AstraZeneca jabs.

If successful, the company built by Hoerr, who has reportedly been nominated for a Nobel Prize, could even eclipse Bayer’s €64bn market value, said von Bohlen, and along with BioNTech, reshape the entire sector.

“MRNA has the potential to become, by orders of magnitude, the broadest therapeutic class in medicine,” he said. “It’s a bit of a revival of the German strength in the pharmaceutical industry.”

The bar chart in this article has been amended since original publication to correct a rounding error

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