As the leading coronavirus vaccine makers in the U.S., Moderna (MRNA 0.89%) and Pfizer (PFE -0.19%) will once again be put to the test by a new viral variant. So far, the market hasn't reacted favorably to comments by Moderna's CEO, Stéphane Bancel, who on Nov. 30 echoed to the Financial Times other scientists' thoughts that "this is not going to be good," regarding the prospects for the continued efficacy of the company's vaccine against the variant.
Bancel's opinion isn't the only thing that investors need to be aware of when it comes to the new variant, though. In particular, there are three facts that will influence how Pfizer and Moderna's stocks perform in light of omicron -- and they aren't all pretty.
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1. Variant-specific booster shots are months away at best
One of the dreams of messenger RNA (mRNA) vaccine technology employed by Pfizer and Moderna is that companies can rapidly formulate and manufacture new inoculations based on late-breaking genomic data from viruses like SARS-CoV-2. Then, by the time the viral threat reaches a large portion of the public, people are already protected.
Unfortunately, that dream hasn't been realized during the pandemic so far, and it probably won't be realized with the omicron variant either. While both Moderna and Pfizer started to develop variant-specific shots for the delta variant, those initiatives were still in progress by the time omicron came around. Though the delta-specific doses might come in handy down the line, early data suggests that the omicron variant is more transmissible and will quickly become more prevalent than the delta variant, meaning that the earlier work could be useless.
But both developers are keen on trying again with omicron, perhaps with an accelerated timetable compared to last time. In particular, Pfizer claims that it can update its product and start shipping new doses within 100 days, if necessary.
For investors, that means two things. First, the stickiness of the omicron variant could be such that there is actually enough time for Moderna and Pfizer to make and deploy omicron-specific boosters, which would lead to significant new revenue being realized within the first half of 2022.
Second, there's now a new development race of sorts, and the competitor that makes their variant-specific formulation faster will make more revenue. And, the runner-up might struggle to make much revenue at all, especially if the omicron variant is replaced by yet another variant.
2. It'll cause more public pushback about vaccine equity
One of the many swirling narratives is that the developing world's vaccine coverage is insufficient, thereby guaranteeing the rise of dangerous viral variants. Of the proposed solutions to this issue, some commentators have settled on waiving patent exclusivity rights for the vaccines such that they can be manufactured anywhere, thereby solving supply constraints.
In my view, there is indeed more that Pfizer and Moderna could be doing to promote distribution of their life-saving doses worldwide. But merely waiving the patent exclusivity protections likely wouldn't be enough to solve the problem, as the manufacturing processes for mRNA shots aren't easy to mimic. Getting third-party manufacturers up to speed would require the companies to transfer technology and know-how, which is quite time-consuming under the best of conditions.
Therefore, investors should expect the pushback against Moderna and Pfizer's exclusive control over their products to escalate further. It's possible that the pair will be legally obliged to spend their resources on sharing their manufacturing technology, as well as the details of their formulations. That might add a small amount to their costs, but the more important thing is that it would slash their global revenue potential for sales quite viciously.
Nonetheless, if they can't scale up their manufacturing capabilities fast enough to serve demand in regions with low vaccine coverage, legal initiatives to compel the opening of the field to new manufacturers would probably save lives.
3. The vaccines will probably still be somewhat effective
As pessimistic as Moderna's CEO may have been about the efficacy of its medicine against the omicron variant, the coronavirus vaccines will likely retain at least some of their protectiveness against severe disease despite the variant's peculiarities. It's unclear exactly how much protection the vaccines will still provide, and it's also unclear whether getting a booster dose will be able to shore up immunity enough to make a significant difference.
These questions will be answered soon, but investors need to keep their eyes on the prize. Even if the vaccines are substantially less useful against omicron, it isn't going to cut into future revenue growth, because they're among the only preventative medicines on the market; right now, there simply isn't anything more effective. Competing products made by Johnson & Johnson and AstraZeneca are likely to face reductions in efficacy too, and there's currently no evidence which suggests that they'll fare any better than the mRNA offerings.
Don't let fear about jab efficacy spook you into selling your shares
If anything, large drops in Moderna or Pfizer stock could be short-lived buying opportunities. Remember, if their vaccines don't work against omicron, that's just an even larger incentive for these companies to rapidly develop a fresh candidate that will work.
