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How Will the Omicron Variant Impact Moderna Stock?

By Keith Speights and Brian Orelli, PhD – Updated Dec 10, 2021 at 4:40PM

Key Points

  • Moderna's COVID-19 vaccine could have much lower efficacy against omicron, according to the biotech's CEO.
  • If he's right, it could translate to the need for omicron-specific vaccines.

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The answer depends on some key assumptions.

Scientists have gone through more than half of the Greek alphabet so far naming coronavirus variants. And vaccine makers, including Moderna (MRNA -1.68%), are scrambling to keep up. In this Motley Fool Live video recorded on Dec. 1, Motley Fool contributors Keith Speights and Brian Orelli discuss how the omicron variant could impact Moderna.

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Keith Speights: First of all, Brian, I guess in one of the biggest news, obviously it is omicron variant. Moderna's CEO Stéphane Bancel, told the Financial Times on Tuesday, I think it was, that he thinks there will be a "material drop" in the efficacy of his company's vaccine with the emergence of the omicron variant. He added, "I just don't know how much because we need to wait for the data."

So Brian, let's assume he's right that there's this material drop in efficacy for Moderna's vaccine. How would this impact Moderna as an investment, do you think? Should investors be more or less interested in the stock if Moderna's vaccine efficacy declined significantly with this new variant?

Brian Orelli: Yeah, I think he's likely right. Based on the number of mutations in the spike protein, there's likely to be some drop in efficacy.

But keep in mind that vaccines create antibodies that bind all over the spike proteins. We make polyclonal antibodies, our immune system does. That's in contrast to the monoclonal antibody treatments that bind to one spot on the protein or two spots, if it's one of the drugs that has two different monoclonal antibodies. The vaccine against the original strain is likely to offer some protection against omicron.

Now to your question, assuming all the vaccines have a similar drop in efficacy, a drop in efficacy is very bullish for Moderna. It means that we'll need to get a new vaccine for omicron. That's potentially three more shots per person, and Moderna will make money off of those shots. It also means that there could be further mutations that could result in annual shots, much like the flu vaccine.

I've said in the past that I didn't think that it was very likely based on the way the viruses create variants. The flu virus recombines and that's how it creates a large number of possible variants. The coronavirus mutates at a single spot while it's being replicated. Potentially more than one, but likely just one at a time.

I'm personally a little surprised at how many mutations developed in omicron. I think some people have hypothesized that it might have happened in an immunocompromised person who was infected for an extended period of time and so that allowed one mutation to occur and then another mutation to occur and then another mutation to occur in the same person. That's possibly how it happened. But definitely, if we need to get boosters that are specific to omicron, that's definitely bullish for Moderna and basically all of the vaccine stocks.

Speights: Brian, you did mention an assumption that all the vaccines have similar drops in vaccine efficacy. That would probably be a pretty safe assumption there. If Moderna's vaccine is a lot less effective against omicron, Pfizer's (PFE -0.42%) and probably Johnson and Johnson's (JNJ 0.43%) vaccines, more than likely would also be much less effective.

Orelli: I think that's a good assumption. I mean, we'll have to wait and see, but in general, because they were all using the same original protein to create the immune response, and they all had basically similar efficacy. Certainly, Pfizer and Moderna's vaccines had pretty almost identical efficacy for the original strain. I think that it's likely that they will have the same efficacy for omicron.

Speights: For what it's worth, I did see that BioNTech's (BNTX -3.59%) CEO said it might have been yesterday that he said he thought that the Pfizer-BioNTech vaccine would still be relatively effective against omicron because of the T-cells I think.

Orelli: Yeah. I think it just depends on where the mutations are relative, so different parts of the protein. If you look at a protein, it's a long chain and that's folded on itself. So only part of that protein is exposed to the immune system. That's where the antibodies are going to bind is on the outside of the folded protein. It just sort of depends on where the mutations are relative to where the antibodies are most likely to be able to find spots to bind onto the protein.

Brian Orelli, PhD has no position in any of the stocks mentioned. Keith Speights owns Pfizer. The Motley Fool recommends Johnson & Johnson and Moderna Inc. The Motley Fool has a disclosure policy.

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