Shares of Moderna (NASDAQ:MRNA) fell 13.5% on Monday after health officials indicated that the omicron variant might lead to less severe forms of COVID-19 than feared.
Omicron is a heavily mutated strain of the novel coronavirus. It appears to be more transmissible than the already worrisome delta variant. Moreover, scientists don't yet know if currently available vaccines will be effective against omicron.
This uncertainty helped to drive the financial markets lower in recent weeks. Amid the volatility, many investors sought shelter in Moderna and other vaccine stocks, on the belief that omicron fears would boost demand for new drugs designed to target emerging coronavirus strains.
However, Chief Medical Advisor to the President Dr. Anthony Fauci said on Sunday that early reports from South Africa, which is experiencing rising COVID-19 cases due to omicron, suggest that the new variant could potentially result in milder forms of the disease.
"Though it's too early to make any definitive statements about it, thus far it does not look like there's a great degree of severity to it," Fauci said.
Some investors apparently took Fauci's comments as a reason to sell Moderna's shares. Presumably, they believe demand for Moderna's vaccine could decline if omicron turns out to be less dangerous than health officials initially feared.
It should be noted that Fauci made it clear that it's too early to know for sure if omicron won't cause severe illness, or if it will in fact do so less often than other variants. U.S. health regulators also continue to recommend that those who are eligible to get vaccinated do so, as COVID-19 vaccines are believed to provide protection against severe illness and death caused by delta and other coronavirus strains. Thus, demand for Moderna's COVID-19 drug might not decline as much as investors who are selling its shares today expect -- and bailing out of its stock may prove to be a mistake.