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What Does the Omicron Variant Mean for Vaccine Stocks?

By Alex Carchidi – Dec 11, 2021 at 10:30AM

Key Points

  • The omicron variant will likely cement the established hierarchy of COVID-19 vaccine stocks.
  • Sales of booster shots are likely to increase.
  • It may be necessary to make a variant-specific booster this time around.

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It looks like the winners will keep winning.

In case you've been living under a rock, you already know that the recently discovered omicron variant of SARS-CoV-2 is spreading globally, and it could be somewhat resistant to the coronavirus vaccines on the market. That's alarming enough on its own -- and if you're invested in some of the leading vaccine stocks, omicron potentially poses an additional concern. 

After all, national healthcare systems won't be clamoring to purchase jabs that are proven to be poorly effective against this new variant. So omicron could change the competitive landscape for coronavirus vaccines just as the delta variant did before it.

Let's analyze what that means for a few of the most important vaccine makers and try to understand how it might impact their share prices.

A doctor wearing protective equipment vaccinates a teenager sitting on a bed.

Image source: Getty Images.

mRNA vaccine makers look to continue their winning streak

On Dec. 8, Pfizer (PFE 0.32%) and BioNTech (BNTX -0.33%) announced they had conducted preliminary laboratory experiments which found that three doses of their product were likely sufficient to maintain a high level of immunity against the omicron variant. They also clarified that people who are vaccinated with only two doses might still be protected against severe disease but are likely still vulnerable to infection.

That's big news because it means that as of now, Pfizer and BioNTech are the only companies whose inoculation is (very preliminarily) confirmed to work well against the new variant in a laboratory-based investigation. Moderna (MRNA -0.91%) is doubtlessly conducting similar experiments to prove the same.

In the meantime, Dr. Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases (NIAID), stated on Dec. 8 that "virtually everything about the effectiveness of the Pfizer [vaccine] can be applied to Moderna. I would really be very surprised if we did not see the same sort of an effect with Moderna as is now being reported with Pfizer." 

So the most likely outcome at the moment is that the vaccines from Pfizer, BioNTech, and Moderna will continue to remain dominant where they're available.

In the event that their inoculations aren't as effective against omicron as the initial data seemed to show, the companies are already putting plans into motion to develop omicron-specific shots. But if similar initiatives launched to combat the delta variant are any guide, they'll be too late to matter.

Will the other vaccine makers ever catch up?

Though they haven't released any data yet, Johnson & Johnson (JNJ 0.08%) and Novavax (NVAX -1.05%) are also trying to figure out how effective their vaccines are against the variant while developing their own omicron-specific jabs. But both face significant challenges when it comes to turning any good news they find into returns for shareholders.

Here's a look at all the vaccine makers vs. the S&P 500 since just before news broke about the Omicron variant:

^SPX Chart

^SPX data by YCharts

On the basis of its signed supply agreements, Johnson & Johnson is planning to sell far fewer doses globally than Moderna, Pfizer, and even Novavax. That's especially disappointing for J&J, considering that Novavax's jab against the original SARS-CoV-2 virus isn't even approved for sale yet in the vast majority of countries.

Unless there's a major benefit to using the J&J vaccine to protect against omicron -- and there's no indication that there will be -- it'll probably keep seeing its market share eroded by better-performing products. Astute readers will note that this situation is very much the same as when the delta variant rolled around and the J&J vaccine was found to be less effective in comparison to the offerings from Pfizer and Moderna.

Novavax's position is less dire, but only because it might take several more months before its shot is widely approved for sale in major markets like the EU and the U.S. That might be enough time for the variant to pass, leaving the question of the Novavax candidate's efficacy against it as a moot point for the purpose of future purchase orders.

It could make sense to bet on the winners 

Right now, it's hard to justify an investment in the vaccine stocks that don't have some solution to omicron ready to go. On the other hand, the news that booster doses of the mRNA vaccines will be necessary to maintain full protection against the variant is positive news for Moderna and Pfizer -- though not a major change to the status quo. 

There is one argument that supports buying more of their stock. In short, we've seen that Pfizer's shot can be made to work against every viral variant so far. Though there's no guarantee that will continue to be the case forever, the enduring efficacy points to a product that investors can have some confidence in. And in our unpredictable world, that's something tremendously valuable.

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson and Moderna Inc. The Motley Fool has a disclosure policy.

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