Buying stock in the companies developing COVID-19 vaccines was a great gamble this year. Some of the leading candidates in the race to defeat the deadly virus have more than doubled in value in just a few weeks.
Moderna (NASDAQ :), for example, is up 631% this year as it reported a success rate of over 90% for its test. Likewise, a German company BioNTech (NASDAQ :), which is partnering with Pfizer (NYSE 🙂 to develop a shot, is up more than 250% this year. Their vaccine received an emergency use permit from the UK on Thursday, pending decisions in the US and the European Union.
Despite these huge gatherings, it is important to understand whether buying a vaccine developer is a long-term successful strategy. Right now, these biotech companies are getting keen interest from day traders who are triggering the volatility of their stocks.
Share prices of Massachusetts-based Moderna, for example, rose a staggering 17% Tuesday morning before plunging 10% in the afternoon session. The stock was up 55%, adding more than $ 21 billion in market value in the past three trading days after the company revealed positive data and filed plans for approval of its vaccine.
Moderna shares closed at $ 157.26 a share Thursday, down from their all-time high of $ 178.50 reached December 1.
"The danger to investors lies in the combination of the importance of these drugs in fighting the pandemic with the attractiveness of long-term business opportunities," wrote Charley Grant in a recent analysis in the Wall Street Journal. "Medicines that patients use less often are generally less valuable to investors, no matter how badly they are needed or how well they sell in the short term."
A Risky Bet
That may be why the stock of Pfizer, the first of the major pharmaceutical companies to announce the effectiveness of their vaccine, didn't move much about its performance. The stock is up 8% this year compared to the, which is up more than 13%.
One danger that could hurt these frontrunners in the race for a vaccine is that there are many vaccines that are near their final stages of development, and if successful, they could push vaccine prices. That possibility makes buying a stock of pure vaccines a risky preposition.
The lead shots, including those from Moderna and one from Pfizer-BioNTech, use a technology known as messenger RNA, while AstraZeneca's experimental vaccine (NASDAQ 🙂 uses a harmless virus to trigger an immune response. .
"Investors now believe mRNA vaccines will occupy the vast majority of the US market, given growing investor concerns about adenovirus vaccines and in particular the recent AstraZeneca data," Morgan Stanley analyst Matthew Harrison wrote in a research note , quoted by Bloomberg.
Investors can expect as much as $ 15 billion in revenue from Moderna's COVID-19 inoculations over the next two years.
Bottom Line
In the COVID vaccine trade, the chance to make real money was correctly predicting the timing of the positive test results and then buying shares of front runners such as Moderna and BioNTech. With that movement over, betting on pure vaccine players may not turn out to be as profitable as many in the market think.
