What happened
The last week of the year is turning out to be a rough one for many COVID-19 related stocks. Shares of Co-Diagnostics (CODX -1.11%) were sinking 12.4% for the week as of the market close on Thursday. Ocugen (OCGN) was down 5.5% after plunging as much as 19.2% earlier in the week. And shares of Sorrento Therapeutics (SRNE.Q -16.67%) were falling 12%. All of these declines are based on data from S&P Global Market Intelligence.
There's probably one common denominator behind the pullbacks for these stocks. Investors appear to believe that the demand for COVID tests, therapies, and vaccines could decline in 2022 and beyond.
Why would that sentiment exist when COVID cases are rising in the U.S. and in other countries? For one thing, the coronavirus omicron variant seems to be less severe than previous strains despite being more transmissible. Oxford University immunologist John Bell even stated that COVID resulting from infection by omicron is "not the same disease we were seeing a year ago" due to significantly lower death rates in the U.K.
Image source: Getty Images.
Investors might have also been surprised by President Joe Biden's statements earlier this week. He said on Monday in reference to the pandemic: "There is no federal solution. This gets solved at a state level." A shift in focus from the federal government to the state level isn't great news for companies that sell COVID-related products.
So what
Although Co-Diagnostics, Ocugen, and Sorrento shares are all falling this week, the outlook for each stock differs somewhat. Of the three, only Co-Diagnostics already has COVID products on the market in the U.S. On Monday, the stock jumped nearly 16% on anticipation that the rise in cases could boost sales for the company's tests. But any increase in revenue could only be temporary.
Sorrento's Covistix COVID test is available in Brazil and Mexico but not in the U.S. yet. The company announced on Monday that the test is able to detect the omicron variant. That positive news wasn't enough to prevent Sorrento's shares from sinking over the following days, though.
Ocugen hopes to win authorization or approval for COVID vaccine Covaxin in Canada and the U.S. But so far, the only news on the regulatory front has been negative. In November, the Food and Drug Administration placed a clinical hold on Ocugen's planned phase 3 study of Covaxin.
On the other hand, there was a positive development for Covaxin outside the U.S. this week. Bharat Biotech, Ocugen's partner, posted data from a phase 2/3 clinical study conducted in India. This data demonstrated a 93% reduction in severe COVID with the vaccine in children ages 2 to 18.
Now what
The key thing to watch with Co-Diagnostics is how well its COVID test revenue holds up into 2022. For the two biotech stocks, Ocugen and Sorrento, pending regulatory decisions will likely serve as the primary catalysts.
