Please ensure Javascript is enabled for purposes of website accessibility

Could the Rush to a Vaccine Hurt Coronavirus Stocks?

By Adria Cimino – Jun 4, 2020 at 6:23AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

As companies race to produce a coronavirus vaccine, half of Americans may not be interested, and that haste may be part of the reason.

Nearly 6.2 million people worldwide are confirmed to have contracted COVID-19, more than 376,000 people have died, and the pandemic is far from over.  So with containment of the coronavirus pandemic proving to be a challenge, many people are pinning their hopes on a vaccine.

There are more than 120 SARS-CoV-2 vaccine programs ongoing at companies or universities, and 10 have already reached the human trial stage. As these programs progress, developers' share prices have climbed, and clinical-stage biotech companies have gotten particularly big boosts. For example, Moderna (MRNA -3.93%), Novavax (NVAX -4.13%), and Inovio Pharmaceuticals (INO -9.95%) have soared by 203%, 1,100%, and 330%, respectively, since the start of the year.

A researcher holds up a syringe and a vial of coronavirus vaccine.

Image source: Getty Images.

To assist in this, the Trump administration recently announced Operation Warp Speed, an initiative to accelerate the development of a coronavirus vaccine. During a virtual town hall meeting for the military, Chairman of the Joint Chiefs of Staff Gen. Mark Milley said a vaccine could be "online" as of this fall, with 300 million doses or more prepared by January. 

The ultimate goal

Bringing a safe, effective vaccine to market would be excellent -- but the ultimate goal is for people to actually get inoculated -- and that's where the problem comes in.

In a mid-May poll, 1,056 Americans were asked if they planned to get a coronavirus vaccine if one becomes available: Just 49% said yes, 20% said no, and the remaining 31% were "unsure." According to the Associated Press-NORC Center for Public Affairs Research, which conducted the poll, among those who said no, the top reason was a fear of possible side effects.

While a vaccine is needed soon, the appearance of excessive haste may work against the companies involved. Vaccine development usually takes years, with clinical trials involving thousands of participants in their later stages. Researchers working on coronavirus vaccines have emphasized that they aren't cutting corners and that their ability to speed up these projects coms from logistics and efficiency. Still, if misgivings about a quickly developed vaccine become a trend, that may prove a drag on the share prices of the companies in this race.

A vaccine in 2021

The AP-NORC poll brought up another problem that could weigh on shares. It revealed that most Americans aren't confident a vaccine can be brought to market in the coming months. More than 60% of those surveyed said they expect a vaccine sometime in 2021. Recent comments by Merck (MRK 0.91%) CEO Ken Frazier are even more cautious. Frazier told The Financial Times that 12 to 18 months to develop a coronavirus vaccine was "very aggressive," and he wouldn't want to hold his company to that time frame.

So what happens if development of the first successful SARS-CoV-2 vaccine does take longer than goals set by the White House? Well, in this particular project where rapidity is in focus, if more time is needed, that may be due to setbacks with the candidates -- and that wouldn't be good news. Investors expecting a product delivered by January may penalize those that report delays, or even hint that one may be looming.

From a financial standpoint, speed to market represents revenue sooner rather than later. There's also the question of the pandemic's duration. At this point, no one knows whether the coronavirus will be a relatively steady ongoing threat, whether it will peak and recede repeatedly, or whether it will disappear completely. There is a great need for a vaccine now. But if development takes significantly longer than planned, will there be a great need for the vaccine when it arrives?

What does this mean for investors?

I expect clinical trial data to drive share prices in the near term. Moderna recently received approval to start a phase 2 trial, Inovio completed enrollment in a phase 1 trial, and Novavax began enrolling patients in the phase 1 portion of its phase 1/2 trial. And that's just to mention a few of the players in this space. Any positive interim results have the potential to rapidly push the shares higher.

The risks linked to bringing a vaccine to market quickly or slowly may weigh on share performance at any time -- if the issues are brought up in the news, for instance. But will these risks have a long-lasting effect on share prices? We'll know the answer once companies offer more concrete information on their planned timelines for regulatory submission and when we have a better understanding of how the coronavirus will be affecting our lives a year from now and beyond.

That doesn't mean you should avoid coronavirus stocks right now. But as always, I don't recommend buying stock in a company based solely on its work toward a coronavirus vaccine. Instead, I advise investing in such companies for their pipelines as a whole. That way, if one program stumbles, there are still other opportunities for success on the horizon.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.