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2 Stocks That Could Soar With the Emergence of the Omicron Variant

By Keith Speights and Brian Orelli, PhD – Updated Dec 13, 2021 at 5:37AM

Key Points

  • If omicron becomes a dominant coronavirus strain, Novavax could benefit, assuming it gains key authorizations for its vaccine.
  • Valneva has developed an inactivated virus vaccine for the original COVID-19 strain, but likely could pivot quickly to an omicron-specific vaccine.

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It's too soon to know what the full impact of omicron will be. But these vaccine makers could be particular winners.

The omicron COVID-19 variant has been in the news quite a bit lately, and it's already been a factor behind the rise or fall of quite a few stocks. In this Motley Fool Live video recorded on Dec. 1, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss two stocks that could soar as the omicron variant spreads.

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Keith Speights: Let's keep talking about the omicron variant a little bit here, Brian. There could be both winners and losers, of course, from an investing perspective, with the emergence of this new variant. Which healthcare stocks do you think are the most likely to soar?

Brian Orelli: If omicron becomes a dominant variant and the current vaccines don't protect people -- those are two assumptions that we have to make in this idea here -- it could reset the market for companies that haven't been able to capture the initial bolus of patients.

I'd say companies that have proven that their vaccine platforms work, but haven't been able to gain approvals, are likely to benefit the most due to their low valuations, but the fact that we know that their vaccines actually work.

I'd say the two most obvious are Novavax (NVAX -3.99%) -- ticker there is NVAX -- Its vaccine has worked in multiple phase 3 clinical trials. It's protein-based, so it might be harder for the company to pivot to the omicron variant compared to the mRNA or adenovirus vaccines. But if the spike protein has fairly similar properties, then it could be that the same manufacturing process could be used to express the variant.

Then Valneva (VALN 0.23%) -- ticker there is VALN -- it's a French biotech company. It has an inactivated virus vaccine. I think maybe it might be harder to pivot to inactivate the new virus, but they could get it done in short order. They could also, I think, benefit quite a bit, considering that they just recently showed that their vaccine to the original strain works pretty well.

Speights: Those sound like two pretty good picks, Brian, stocks that could really skyrocket if this new variant is really bad, really causes problems.

I personally think Novavax is set to really jump anyway. Even before the emergence of the omicron variant, I was thinking, Novavax -- it's awaiting regulatory authorizations or approvals in several markets. It's still saying that it's going to file for U.S. Emergency Use Authorization for its COVID-19 vaccine this month.

There are just several catalysts that are just out there for Novavax, even without omicron. I would think Novavax will be in a good position to move higher with omicron. I think you're exactly right. Novavax could very well be one of the biggest winners on the market.

Orelli: Of course, it has contracts already set up with quite a few government agencies that signed them before Novavax had all of its manufacturing issues. Eventually, it should get paid, assuming it can actually gain emergency authorizations in those various countries.

Speights: And one of the biggest deals is with the European Union. I think the European Union, when they accepted Novavax's authorization filing, said that they can make a decision within a matter of weeks. We could really see a major approval/authorization for Novavax this month. I mean, it's possible. No guarantees there, obviously, but it's quite possible.

Brian Orelli, PhD owns Novavax. Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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