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Why Shares of VBI Vaccines Soared, and Then Fell 7%, on Tuesday

By James Brumley - Jun 29, 2021 at 4:14PM

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Investors almost seemed ready to take profits once shares hit their highest level since February.

What happened

Seemingly good news from VBI Vaccines (VBIV 14.63%) quickly turned into trouble for shareholders during Tuesday's trading. Shares of the biopharma developer opened higher following news that its COVID-19 vaccine VBI-2902a showed measurable effectiveness in phase 1 testing, and at one point were up as much as 7.5%. As of the end today's session, however, the stock was down 7.2% as at least some investors saw the strength as a selling opportunity.

So what

Although COVID-19 vaccines from multiple pharma companies are available and now being widely administered, most are proving at least partially ineffective against newer strains of the virus. VBI Vaccines' work with VBI-2902a is promising in that the eVLP (enveloped virus-like particle) solution may readily target known as well as emerging strains. The drug is being tested as part of what's described as an adaptive phase 1/2 clinical, which allow for mid-trial adjustments rather than forcing outright restarts of testing when such adjustments can be safely made.

Falling chart plotted on a chalkboard.

Image source: Getty Images.

Now what

The bullish response to Tuesday's headline certainly makes sense. But the stock's sharp intraday reversal illustrates why investors should always put news in the proper context. VBI-2902a isn't the only COVID-19 vaccine the company is working on, and even if it were, it could be months before any of them are approved. Much can happen in the meantime.

A thorough look at the chart of VBI Vaccines' stock chart would have also made clear that shares began Tuesday's session a bit overextended thanks to the 55% rally from last month's low. A "sell the news" response was possible, even if not probable.

The development of alternative coronavirus vaccines is well worth watching. For investors though, one encouraging headline at this early stage isn't enough to prompt a buy from anyone other than true speculators.

James Brumley 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.

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