What happened

Shares of COVID-19 vaccine developers Novavax (NASDAQ:NVAX) and BioNTech (NASDAQ:BNTX) are down 9.2% and 16.1%, respectively, as of 1:19 p.m. ET Monday. Most other makers of COVID-19 vaccines are also under pressure after Moderna (NASDAQ:MRNA) President Stephen Hoge cautioned the world in an interview on Sunday that the existing vaccines may be relatively ineffective in preventing the spread of the new Omicron variant of the coronavirus.

Then there's the fact that pill-based treatments for the disease are nearing their commercial availability.

So what

In an interview with George Stephanopoulos on ABC's This Week, Hoge commented there's a "real risk" that COVID-19's Omicron strain won't be particularly responsive to vaccines that began development even before the Delta variant emerged. It's possible that existing formulations may need to be updated in order to combat the spread of COVID-19. These changes could take weeks to complete, assuming that doing so would produce effective treatments.

Hoge's warning mirrors a similar warning from Moderna CEO Stéphane Bancel a week earlier which didn't upend vaccine manufacturers' stocks. But much has changed in the meantime. As of the end of last week, Omicron infections have been confirmed in 17 different states as well as in several parts of the world. The latest variant may be on track to becoming COVID-19's dominant strain.

The advent of the Omicron variant isn't the only factor contributing to the sharp decline of vaccine stocks today. 

Pharmaceutical giants Merck (NYSE:MRK) and Pfizer (NYSE:PFE) have only recently reached key milestones in their development of oral antiviral treatments for COVID-19. A week ago, a U.S. Food and Drug Administration (FDA) advisory committee recommended the FDA approve Merck's antiviral drug molnupiravir as an emergency-use treatment for existing COVID cases in high-risk adults. Pfizer is still waiting for the same green light from the FDA for its Paxlovid. The government has already committed to purchasing 10 million doses of the drug if and when it is approved.

While neither treatment has been specifically tested as a treatment for Omicron infections, both companies say their pills should prove effective against the new strain. The need for these options may have just exploded if Hoge's and Bancel's concern is justified.

Falling stock chart on a computer screen.

Image source: Getty Images.

Monday's multifaceted shake-up on the COVID-19 front rattled more biopharma names than just Novavax and BioNTech. The sell-off dragged down many vaccine-related stocks, including small caps like Arbutus Biopharma (NASDAQ:ABUS) and VBI Vaccines (NASDAQ:VBIV), which are down 13.1% and 8%, respectively, as of midday. Arbutus claims Moderna is using some of its intellectual property with its Moderna vaccine -- an argument the U.S. Court of Appeals bolstered after it rejected Moderna's effort to invalidate two of Arbutus's patents. VBI Vaccines is developing an alternative COVID vaccine of its own. While its VBI-2901 is being designed to target several known strains of the virus, none of those targets are the Omicron variant.

Now what

The knee-jerk sell-off is understandable given the circumstances. Veteran investors can attest to the idea that the time to buy a stock is when it's beaten down. It's possible that the aforementioned vaccine stocks will rebound eventually. Many of the most common ones can possibly be adapted for the Omicron strain.

In a bigger sense, Monday's sell-off underscores a risk that's been in place since any of these companies began working on a COVID-19 vaccine; they're all just one mutation away from being upended. That's why today's sharp sell-offs aren't necessarily a buying opportunity, particularly for buy-and-hold investors.

Certainly, speculators will be interested in positioning for an equally brisk rebound. Given all the new unknowns and variables in play here, however, that sort of trading is more like casino-based gambling and less about true long-term investing. In other words, it can pay off, but the risk of significant near-term loss may be too great for many investors. If you're stepping in for the long haul, just be sure the company has something in the hopper besides a COVID-facing product.

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.