What happened
Shares of vaccine developers Moderna (MRNA 1.69%), BioNTech SE (BNTX 0.58%), and Novavax (NVAX 3.54%) rallied hard on Monday, up 9.3%, 6.5%, and 13%, respectively in the day's trading.
COVID-19 cases and hospitalizations are back on the rise, thanks to new mutations, especially one nicknamed Eris. Late last week, both Moderna and BioNTech's partner Pfizer (PFE 0.55%) each announced preliminary studies of their new mRNA boosters developed for the XBB variant were effective against Eris, as well as other strains currently on the rise in the U.S. On Monday, the Biden administration announced a fall campaign to get people to get new boosters, further "boosting" the pro-vaccine sentiment today.
While Moderna, BioNTech, and Novavax's futures will depend on their pipeline of new vaccines for other diseases beyond COVID, the new variants present an opportunity to generate more revenue and earnings in the near term this fall.
So what
Recently, the CDC has reported COVID hospitalizations ticking up 14% week over week, with emergency room visits, test-positivity rates, and levels detected in wastewater all on the rise. Given that, on Monday, the Biden administration announced it would encourage all citizens to get the updated versions of booster shots when available this fall.
Last week, Moderna announced preliminary trials of its new XBB-targeted booster showed "significant boost in neutralizing antibodies" for the Eris variant and another new variant known as Fornax. Meanwhile, the BioNTech-Pfizer partnership also announced last week its new vaccine aimed at the XBB subvariants was also effective against the Eris strain in a study performed on mice.
Meanwhile, Novavax has also created a vaccine aimed at the XBB subvariants, which is also likely to offer protection against Eris, which is close in genetic makeup to the XBB subvariants of omicron. Of note, Novavax uses a different technology than Moderna and BioNTech, using the actual coronavirus spike protein in nanoparticle form, rather than the mRNA copy developed by the other two.
The FDA has not approved the new vaccines yet, as they are still making their way through trials; however, it looks as though if all goes according to plan, they will be approved, and also receive a marketing boost from the Biden administration this fall. That could help the supposed one-time windfall from COVID for these companies get a second act.
Now what
Each of these vaccine stocks have had a rough year, down between 20% and 38%, as seen in the chart, even as the broader market has rallied. Each is a growth stock that has been harmed by a toxic combination of declining COVID-era financials and higher long-term interest rates.
Though Novavax doesn't currently make profits, both Moderna and BioNTech do generate earnings currently, but those revenues and earnings from COVID vaccines are trailing off after the blockbuster years of 2021 and 2022. Thus, each stock is now mostly dependent on their innovation pipeline for other use cases, such as flu, RSV, or potentially even cancer vaccines at some point.
Still, this recent surge of COVID has been somewhat unexpected, and should rejuvenate some of that lost COVID revenue from 2021 and 2022 this fall. However, the revenue and profit boost isn't expected to be nearly as large. Hence, why these stocks still remain well below their highs, even after Monday's spike. Investors should welcome the news but keep their eyes on each company's pipeline, which is where their real value lies.
