Covid Vaccine Stocks May Cause Excess Optimism, Losses
Vaccines from Pfizer and Moderna are essential to end the coronavirus pandemic, but investors should remain cautious
Coronavirus treatment stocks come with an important side effect: they tend to sell off on the news.
After months of grim pandemic headlines, this week finally brought signs of major progress: Pfizer PFE +2.14% and its partner BioNTech announced their Covid-19 vaccine was more than 90% effective. What’s more, Moderna —whose vaccine uses a similar technology to Pfizer’s—said Wednesday its vaccine candidate should have efficacy data soon. Even as Covid-19 cases are surging in the U.S., it is finally possible to imagine the end of the pandemic.
While that is wonderful news for public health and the economy, day traders should be on guard even if Moderna hits the mark. Pfizer and BioNTech both initially surged on Monday, but the euphoria didn’t last.
BioNTech shares have doubled since June, but are down more than 6% from Monday’s opening price. Pfizer shares are flat since May and down 8% from Monday’s open. Gilead Sciences GILD +0.98% stock is down about 30% since the spring, as investor enthusiasm for its antiviral Covid-19 treatment remdesivir has waned. Moderna shares have already risen nearly fivefold this year.
The danger for investors lies in conflating the importance of these drugs in fighting the pandemic with the attractiveness of the long-term business opportunity. The most lucrative medications have historically been drugs that patients need on a recurring basis. For instance, AbbVie’s ABBV +1.81% anti inflammatory drug Humira continues to generate billions in sales well into its second decade on the market. Rheumatoid arthritis patients who take Humira generally require a dose every two weeks. Statins, the blockbuster drug class of yesteryear, are typically taken daily.
Drugs that patients take less often tend to be less valuable to investors, no matter how badly they are needed or how well they sell in the short term. Gilead booked nearly $900 million in remdesivir sales in the third quarter, but the company’s stock has still declined. It remains unknown how long Covid-19 vaccine protection can last in patients. But even if shots are required annually, a flood of competitors could arrive in the months ahead, which will put significant pressure on vaccine prices over the long term.
In the case of Moderna, the company has many other programs in development that could prove valuable over the long term. But recent history suggests that day traders should brace for a letdown.