Just when there seems to be a light at the end of the COVID-19 pandemic, there's a new twist. Millions of people across the world have received vaccines. Now, though, there are new coronavirus variants that appear to be more contagious. 

Should investors really worry about the potential impact of these variants? Will the COVID-19 vaccines still be effective against the new strains? Here's what you need to know.

Stock chart with coronavirus overlaid on a globe in the background

Image source: Getty Images.

Good news

Let's start off with some good news. Last week, Moderna (MRNA 2.41%) reported that in vitro studies showed that its COVID-19 vaccine, mRNA-1273, produced neutralizing antibodies against the B.1.1.7 coronavirus variant first found in the U.K. and the B.1.351 variant first identified in South Africa. The company stated that neutralizing titer levels were higher than the levels that should be needed to protect against the new variants. 

Two days later, Pfizer (PFE 1.37%) and BioNTech (BNTX 5.92%) announced encouraging results from an in vitro study of their COVID-19 vaccine BNT162b2 (marketed as Comirnaty). The companies also reported that their vaccine appeared to neutralize both variants.

We also received news last week from two other drugmakers about how their experimental COVID-19 vaccines fared versus the new coronavirus strains. Novavax (NVAX 0.89%) announced on Jan. 28 that its candidate, NVX-CoV2373, demonstrated efficacy against both B.1.1.7 and B.1.351 in a late-stage study conducted in the U.K. The biotech estimated efficacy of 85.6% against the U.K. variant.

Johnson & Johnson (JNJ 0.64%) reported results from a global late-stage study of its COVID-19 vaccine candidate the day after Novavax's news. The healthcare giant's vaccine differs from the other leading coronavirus vaccines in that it requires only a single dose instead of two doses. J&J said that a single dose of its vaccine showed efficacy against new coronavirus strains, including the one first identified in South Africa. 

A cause for concern?

So everything looks great, right? Not so fast. It's pretty clear from all of the results reported so far that the efficacy for existing vaccines is lower against the B.1.351 South African variant than the existing prevalent coronavirus strain.

Pfizer and BioNTech sounded the most optimistic. The companies stated that neutralization of the South African variant was only "slightly lower" than that for other strains. They believe that the small differences "are unlikely to lead to a significant reduction in the effectiveness of the vaccine." Moderna, on the other hand, said that there was a significant reduction in the production of neutralizing antibodies with its vaccine against the South African variant compared to other variants. 

But the data from Pfizer/BioNTech and Moderna were only from test-tube studies. Novavax and Johnson & Johnson provided a better picture of how their vaccines worked in the real world against the new strains.

In addition to announcing results from its late-stage U.K. study last week, Novavax also reported preliminary data from a phase 2 study of NVX-CoV2373 conducted in South Africa. The biotech said that nearly 93% of the COVID-19 cases in the study so far were caused by the B.1.351 variant. Its vaccine's efficacy in the study was 60%, well below the 95.6% efficacy against the existing coronavirus strain.

Part of J&J's global late-stage study was also conducted in South Africa. The big company stated that the efficacy in these participants was 57%, much lower than the 72% efficacy observed in its U.S. participants. Nearly all of the COVID-19 cases (95%) in the South African group were due to infections by the B.1.351 variant.

The bottom line is that it's quite possible that the overall efficacy of COVID-19 vaccines will be significantly lower against the South African variant. Granted, it appears at this point that the vaccines will be effective enough to slow the spread of the coronavirus. However, it might take longer to reach herd immunity than hoped. 

Potential investing implications

So what does this mean for investors? At the broader scale, it could hint that work-from-home stocks like Zoom will continue to enjoy solid momentum throughout 2021. The same could apply for the stocks of companies marketing COVID-19 tests such as Abbott Labs and Quidel. Recovery plays, on the other hand, including brick-and-mortar retail stocks, might not fare as well if the pandemic goes on longer than anticipated.

Some of the biotech stocks we've already mentioned could also be winners. Moderna and Novavax, for example, have already announced plans to advance booster shots targeting the new variants into clinical testing. Success in these studies could provide catalysts for both stocks.

Perhaps most importantly, the emergence of worrisome new coronavirus variants could foreshadow a future where new strains are a common occurrence. This could mean that the stocks of the companies with the greatest flexibility to develop new vaccines targeting these variants will have tremendous market opportunities for a long time to come.