What happened
Another day, another setback for biopharma names that were previously among the market's highest-flying stocks.
On Monday, COVID-19 vaccine makers Novavax (NVAX) and Moderna (MRNA -1.39%) suffered declines of 6.1% and nearly 2%, respectively, although at one point shares of Novavax were down by as much as 21%. Moderna was down nearly 14% during a trading session that at one point saw the S&P 500 (^GSPC -0.22%) in the red by 2.5% before it bounced back to close with a slight gain.
Even with their partial recoveries, however, Monday extended a run of sizable declines by these companies over the course of the past several weeks. Novavax is now down 66% from last month's peak, and Moderna is currently 68% below its August high. Most of their peers have suffered similar sell-offs.
The thing is, things could still get worse before they start to get better.
So what
Larger, more diversified pharma companies Johnson & Johnson (JNJ 0.67%) and Pfizer (PFE -0.12%) fared slightly better Monday, with losses of 1% and 2.3%, respectively. Shares of Pfizer's vaccine partner BioNTech (BNTX -0.27%) snapped back from what was at one point a decline of 8.4% to log a 2.4% gain for the day.
Regardless, curious investors shouldn't expect to find any company-specific reasons these stocks sold off Monday. They won't find any. Rather, what's in play are bigger-picture issues. COVID-19 vaccine stocks are imploding as many of the previous presumptions regarding how the world was going to address the pandemic unravel.
Image source: Getty Images.
Case in point: While there's been ample evidence the initial vaccines designed to combat the alpha and beta variants have some efficacy against the rampantly spreading omicron variant, the data available so far is mixed, at best. What is clear is that booster shots are required to achieve adequate immunity against omicron -- and perhaps what will be needed are omicron-specific boosters, several of which are already in the works. Even so, another variant of concern could surface in the meantime and change the calculus yet again.
Government mandates for vaccination that were proving a boon for vaccine manufacturers (or that were expected to do so) are also now hitting judicial branch roadblocks. Just days after the U.S. Supreme Court blocked President Biden's plans to require large companies to require all employees to either get vaccinated for COVID-19 or tested for it regularly, many corporations have dialed back their own efforts to protect their employees and customers from exposure to the disease. Starbucks, for instance, abandoned its internal mandate for employees. Other organizations like workwear maker Carhartt continue to require vaccinations even in the absence of a federal mandate, but that company now faces a backlash as conservatives on social media are calling for a boycott of the brand.
Overseas, the political appetite for lockdowns and mandates to stem the omicron wave is also withering. The U.K. has dropped all mask mandates and social distancing protocols put into place in 2020, for example, following the lead of other European countries. China has lifted its weeks-long lockdown of the city of Xi'an despite the continued spread of the disease there, and just weeks before the country plays host to the 2022 Winter Olympics.
In short, investors are just connecting the dots. Two years into this pandemic, much of the world is moving on from trying to contain it.
Now what
None of this is to suggest there will no longer be a strong market for COVID-19 vaccines. Indeed, it's likely that such shots will become a recurring part of normal preventive healthcare efforts like flu immunizations. As drugmakers BioNTech, J&J, Moderna, and others learn more about COVID-19, it's conceivable that they will be able to develop injections similar to the measles and chickenpox vaccines, which each only require a pair of lifetime doses.
At the present time though, shares of ballyhooed Novavax, Moderna, Pfizer, and others are facing their days of reckoning in the wake of two years worth of overly aggressive, emotionally charged stock buying. BioNTech's shares are now 60% below their November peak despite Monday's intraday recovery. Mostly, this comes down to the fact that COVID-19 was never going to be the permanent opportunity that was being priced into these stocks.
To this end, while all of these biopharma stocks recovered a good fraction of their intraday declines before Monday's closing bell rang, it's too soon to say that the price rationalization phase has run its full course. Tread lightly buying in this niche, if you must tread at all.
