Has the COVID-19 vaccine stock bubble exploded?


COVID-19 vaccine stocks have easily been the hottest niche in the overall market since March. Companies in the development phase such as Inovio Pharmaceuticals (NASDAQ: INO), Modern (NASDAQ: ARNM), Novavax (NASDAQ: NVAX), Vaxart (NASDAQ: VXRT), and Organic heat products (NASDAQ: HTBX) All have seen their actions increase at a dizzying rate in 2020, thanks to their vaccine candidates against the coronavirus.

In addition, pharmaceutical giants such as AstraZeneca (NYSE: AZN) and Pfizer (NYSE: PFE) even participated in the act. Pfizer, for example, reached a market cap of over $ 33 billion at one point this year solely because of its promising coronavirus mRNA vaccine platform, which is being co-developed with a German partner. BioNTech (NASDAQ: BNTX).

Image source: Getty Images.

A funding windfall

This sudden and dramatic appreciation in COVID-19 vaccine stocks was not without reason, however. Far from there. AstraZeneca, GlaxoSmithKline (NYSE: GSK) and partner Sanofi (NASDAQ: SNY), Johnson & Johnson (NYSE: JNJ), Moderna, Novavax and the Pfizer / BioNTech couple have brought in about $ 11 billion from the US government’s Operation Warp Speed ​​program this year.

And if Congress passes a second relief bill, this COVID-19 vaccine research and development effort could result in yet another multibillion-dollar infusion of money. To top it off, the Coalition for Epidemic Preparedness Innovations (CEPI), a non-profit organization, has launched large grants to also accelerate the development of a COVID-19 vaccine.

A sudden change in feeling

COVID-19 vaccine stocks, however, had a tough time in August. Stocks of Heat Biologics, Inovio Pharmaceuticals, Moderna, Novavax and Vaxart essentially collapsed this month (see chart below). And even bigger players like AstraZeneca, GlaxoSmithKline, Pfizer and Sanofi have all pulled back significantly from their 52-week records in the past four weeks.

VXRT data by YCharts

What triggered this brutal exodus of COVID-19 vaccine stocks? Several headwinds rocked stocks of coronavirus vaccines this month. The five most important developments are:

  1. On August 11, Russian President Vladimir Putin announced the approval of the world’s first COVID-19 vaccine, dubbed Sputnik V.
  2. The political stalemate in Washington DC has blocked the second tranche of vaccine research funding at the federal level.
  3. AstraZeneca, Johnson & Johnson and Pfizer could all have a vaccine on the market in record time. Investors, in turn, appear to fear that smaller players like Heat Biologics, Inovio Pharmaceuticals, Novavax and Vaxart may be left behind from a market share perspective.
  4. On August 23, President Trump, in conjunction with the Food and Drug Administration, announced authorization for the emergency use of convalescent plasma therapy for hospitalized COVID-19 patients. This news appeared to trigger a migration of cash into convalescent plasma therapy stocks at the expense of vaccine-focused biotechnology.
  5. August 26, Abbott Laboratories got the green light from regulators for its $ 5 COVID-19 test, which can give results in as little as 15 minutes. This ultra-cheap, ultra-rapid diagnostic could dramatically reduce the spread of COVID-19 – possibly reduce long-term business opportunities for vaccine companies.

Has the time passed for vaccine stocks?

The most important issue to understand is that more than one vaccine will likely be needed to really slow the spread of COVID-19. There will be no universal vaccine; a fact that could leave the door open for companies like Heat Biologics and Vaxart who are developing vaccines with new patient populations in mind. That being said, the rising tide phenomenon among COVID-19 vaccine stocks appears to have run its course based on the terrible price action this month.

Today, there is still a lot of money to be made within this equity group, despite this rather rapid niche-wide regression to the average in August. However, biotech investors may need to take a long-term view of the COVID-19 vaccine landscape in order to separate the wheat from the chaff.


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