The news Monday regarding AstraZeneca (AZN +0.00%)'s trial of coronavirus vaccine AZD1222 seemed to be the type of information that would push a stock's price up, not down.
Interim results from the phase 1/2 trial of the company's vaccine, which was developed in partnership with Oxford University, suggested that it drove antibody and T-cell immune responses against COVID-19 in each of the study's 1,077 participants.
While the trial is only into its third month, that's a big deal. No COVID-19 vaccine has yet been approved. An article in The Lancet cited the World Health Organization as saying that there are more than 137 coronavirus vaccine candidates in clinical trials and 23 more in the preclinical stage. The AZD1222 study is one of only two such candidates now entering the third stage of trials.
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AstraZeneca and Oxford University were given up to $1.2 billion from the Biomedical Advanced Research and Development Authority as part of Operation Warp Speed, the Trump administration's push to have a widely available coronavirus vaccine by this winter.
What went up came quickly down
AstraZeneca's stock rose initially on the news, jumping nearly $3 a share from Friday's close to $61.40 on Monday morning. However, when the market closed Tuesday, AstraZeneca stock had dropped to $58.07, and by Friday's closing bell, it was below $56.
Why? Analysts looked beyond the sunny picture of AstraZeneca's release, in which it said that the drug had "only minor side effects," to see exactly what that meant.
The study said the side effects included "pain, feeling feverish, chills, muscle ache, headache, and malaise." That doesn't sound minor, especially when you see that participants were given a gram of acetaminophen every six hours for 24 hours after the injection of the vaccine to reduce fever, headaches, or muscle aches. Of course, given a choice between getting COVID-19 or dealing with a headache and a little fever, most people would gladly choose the latter. However, the fact that the side effects were largely glossed over made some wonder whether researchers are being overly optimistic about the vaccine's outcome.
To be fair, other recent COVID-19 vaccine candidates have shown similar side effects. Nearly all phase 2 test subjects given mRNA-1273, a candidate from Moderna (MRNA 4.01%), exhibited fatigue, fever, muscle aches, and headache.
Another, arguably larger reason for the drop in AstraZeneca's stock is that the pharmaceutical company is competing against so many other vaccine candidates. Partners BioNTech (BNTX 0.10%) and Pfizer (PFE +1.24%), for instance, also announced phase 1/2 clinical results for their vaccine candidate on Monday, though they did so via a preprint (without peer review) rather than in a peer-reviewed journal. Moderna's most recent phase 1/2 results came out last week in a New England Journal of Medicine report.
Still a good stock, with or without a vaccine
Vaccines normally take up to 10 to 15 years to produce, not months. Things are rushing forward at light speed because of the worldwide necessity for a coronavirus vaccine, but it's equally possible that multiple candidates will be successful or that none of them will work in the real world. Despite our best efforts, we still don't have vaccines for malaria, HIV, or tuberculosis.
Another potential concern is that while AZD1222 has been shown to produce antibodies, it hasn't been proven yet whether those antibodies will prevent the virus from hitting healthy cells -- or, if so, for how long. The vaccine works by mimicking the spike protein used by COVID-19 to infect cells. The hope is that after being vaccinated, the body's immune system will recognize the spike protein and swiftly mount its defense.
More encouraging, perhaps, is that the vaccine elicited a T-cell response, which should stimulate the immune system to attack cells infected by the virus.
Even if AZD1222 turns out to be the first viable COVID-19 vaccine candidate, a better vaccine could quickly supplant it. There's also the possibility that a mutation of the SARS-CoV-2 virus would make any current vaccine useless.
Fortunately, AstraZeneca is still a good stock no matter the coronavirus vaccine outcome. The company produced $24.4 billion in revenue last year and has had six consecutive quarters of revenue growth. It also has a huge pipeline that includes a growing number of oncology drugs. In the first quarter of 2020, the company's revenue was up 17% year over year, and it maintained its full-year guidance of single-digit to double-digit revenue growth. Those are solid reasons to invest in AstraZeneca whether its vaccine candidate succeeds or not.
