What happened

Shares of COVID-19 vaccine developer Vaxart (NASDAQ:VXRT) and coronavirus diagnostic test manufacturers Opko Health (NASDAQ:OPK) and Quidel (NASDAQ:QDEL) plunged more than 35% in August, according to data provided by S&P Global Market Intelligence.

Vaxart's shares were down 36.9%, Opko's fell 37.1%, and Quidel's dropped 37.7% for the month. Even with those big drops, however, the companies' stocks have more than doubled in price year to date. Opko's and Quidel's shares are up more than 100% so far in 2020, while Vaxart's have risen a jaw-dropping 1,300%.

An eye dropper drops clear liquid into a test tube.

Image source: Getty Images.

So what

Up until mid-July, it seemed as though any coronavirus-related healthcare stock could do no wrong, as far as the market was concerned. Vaccine developers, diagnostic test makers, and other related companies saw their shares rise -- some astronomically high. Then, the market seemed to realize that, with dozens of companies making COVID-19 tests and more than 150 vaccine candidates in various stages of development, all of the companies were unlikely to be winners.

By August, many, if not most, coronavirus-related companies were seeing their shares drop like stones. For the smaller vaccine manufacturers, this was largely due to the entry of some well-funded and experienced companies like AstraZeneca and Pfizer into the vaccine race. With such heavy hitters in play, investors were rightly nervous about whether an untested small biotech was likely to be one of the first to successfully bring a vaccine to market.

For companies that had been making coronavirus diagnostic test kits, a similar situation occurred when heavy hitter Abbott Laboratories (NYSE:ABT) announced on Aug. 26 that it had received emergency use authorization (EUA) from the FDA for a rapid COVID-19 antibody test. According to Abbott, its test would only cost about $5 and could deliver results in about 15 minutes. Worse for the makers of slower and more expensive tests -- but better for public health -- Abbott believes it can ramp up production of its tests quickly, and expects to be able to deliver 50 million tests per month by the beginning of October.

That was bad news for Opko, which offers a non-rapid response test through its BioReference Laboratories subsidiary that takes 24 to 72 hours to deliver results. However, it's even bad for Quidel, which already offers a rapid test that can deliver a result in about the same time as Abbott's new test. You see, Quidel's test requires its Sofia diagnostic testing machine, which many testing locations don't own. Abbott's test, on the other hand, is a stand-alone product, and therefore usable in a wider variety of locations.

Meanwhile, no company has yet received approval -- or even EUA -- from the FDA for a coronavirus vaccine. However, on Aug. 11, Russian president Vladimir Putin announced that Russian scientists at Moscow's Gamaleya Institute had successfully created a COVID-19 vaccine, dubbed Sputnik-V, that he was approving for widespread use. Even though the vaccine hadn't had a phase 3 clinical trial, and the Gamaleya Institute provided no scientific data from its earlier trials, shares of vaccine makers suffered. Vaxart's stock, which had hit a high point for the month, dropped 14.4% on the news.

Now what

For vaccine developers like Vaxart, the race continues. While the likelihood of any single company being the first one to bring a vaccine to market is low -- there are 33 vaccines in clinical trials around the world and more than a hundred others in various other stages of development, after all -- Vaxart is working on a vaccine tablet that's taken orally as opposed to an injected liquid. That could give it a leg up on some of its competitors as it could be self-administered. 

The COVID-19 testing operations of Opko and Quidel, on the other hand, may be in serious trouble unless they can come up with a product that can match Abbott's for speed and efficacy. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.