As people acclimatize to the new normal, it’s time to look at some vaccine stocks to sell.
Instead of relying primarily on vaccines and antiviral drugs, the government let people manage infections. Once infected with the less fatal strain, Omicron, people would isolate themselves for a few days and then return to work. By shifting away from its reliance on drug companies, investors must recognize there are vaccine stocks that it’s time to sell.
The government cut orders for vaccines and antiviral drugs, which already is hurting vaccine stocks. People realized that the vaccine specific to the Delta variant offered minimal protection against the current strains. As Omicron sub-variants emerge, health organizations will evaluate the effectiveness of bivalent vaccines first.
Investors should brace for a sharp drop in vaccine and test kit sales. Those are the vaccine stocks to sell.
In addition, companies that depend on antiviral sales risk underperforming. Still, their revenue drop is less severe. The population at the greatest risk of mortality and lingering effects of infection needs antiviral drugs.
Abbott Laboratories (ABT)
Abbott Laboratories (NYSE:ABT) traded below $100 for the first time in two years. The company, which makes Covid test kits, fell out of favor in May amid its baby formula manufacturing suspension.
The Food and Drug Administration had 15 key findings for Abbott’s baby formula production including increasing the company’s workforce, training more staff and having more safety equipment. Abbott also needs a modern information technology system to supply the response team with real-time data.
In the last quarter, Abbott recorded Covid test sales of $2.3 billion. BinaxNOW in the U.S. accounted for 95% of those sales.
Ironically, Covid surges and lockdowns in China slowed Abbot’s Medical Devices revenue. Device sales grew by 7.5% in the quarter. As the lockdown eases in China, the devices sector could improve later this year.
AstraZeneca (NASDAQ:AZN) is down more than 20% this month. Investors dumped the stock despite positive news related to Covid-19 treatments.
On Sept. 16 the European Medicines Agency (EMA) recommended the approval of AstraZeneca’s Evusheld. The drug is for people aged 12 years or older with Covid-19 who did not need supplemental oxygen but are at increased risk of progressing to severe Covid.
Outside of Covid treatment, the European Union recommended the approval of Beyfortus (nirsevimab). This drug offers protection against respiratory syncytial virus (RSV) disease.
The positive news failed to encourage investors to buy AZN stock. Shares now trade at a forward price-to-earnings of 15 times. In addition, the $1.90 a share dividend yields 3.48%. Still, the attractive yield is not enough to offset the nearly 20% stock drop in the last month.
BioNTech (NASDAQ:BNTX) and Pfizer filed for Swissmedic authorization of a second bivalent COVID-19 vaccine.
The companies updated the vaccine with half the mRNA coding for the spike protein from the original variant. BioNTech designed the other half of the mRNA to stimulate the production of neutralizing antibodies against Omicron.
Even though this submission will target Omicron subvariants BA.4 and BA.5, investors ignored the news. BNTX stock faced severe resistance at the 20-day simple moving average. Shares are down 45% so far this year.
More recently, the U.S. Centers for Disease Control and Prevention said the updated Covid booster shots for children should be available beginning in early to mid-October.
Despite the implications of a higher addressable market for vaccine sales, investors are unimpressed. They are betting that people will not subject their children to the next vaccine this fall season.
The company praised its strong execution during the second quarter. For example, it progressed further on the development and optimization of the CoDx PCR Home testing platform. Investors expected more. Lower volumes of its Logix Smart Covid-19 Test resulted in sharply lower revenue.
Public funding assistance for testing programs is falling. The government requires few if any, travel and public venues. The overall downtrend for test kits is unstoppable. Investors are assuming that another wave is unlikely.
Co-Diagnostics pointed to experts believing other waves of Covid variants are inevitable. If mutations increase the danger of catching the infection, it might reverse the negative downtrend in test kit demand.
The company may pivot its business on developing a platform for affordable, decentralized PCR testing. However, it cannot rely on detecting only Covid. More diseases will emerge from other viruses. Yet the company is not ready to rely on testing anything other than Covid.
Novavax (NASDAQ:NVAX) plunged by 31% in the last week. Bearishness accelerated after JP Morgan (NYSE:JPM) downgraded the stock. It cited the company has weak long-term prospects making it one of the vaccine stocks to sell now.
Regulators approved Novavax’s first protein-based vaccine in 2022. However, demand for a vaccine peaked in the first and second wave more than 12 months ago. Weak product sales will increase the risks of quarterly losses. Countries that ordered the vaccine may cancel or cut the number of units. Novavax faces operational risks when costs exceed revenue.
If Novavax runs at negative cash flow, it will need to raise cash by selling shares. Unfortunately, the bear market is unreceptive to biotechnology companies with uncertain prospects. The company might need to re-align its efforts in developing a vaccine for another disease, such as Influenza. This strategic change will come at a higher cost.
Investors are wary of holding a company that might lose more money. NVAX stock is a stock to avoid holding.
Pfizer (NYSE:PFE) said that it cut the cycle time of developing drugs by 2.5 years. Paxlovid is an antiviral drug that is an example of quick development, but markets are bearish on the drug’s prospects.
The stock is showing signs of heading lower as it heads near its 52-week low.
The company’s overall prospects do not depend on the pandemic. For example, it projected a revenue potential of $25 billion from 2025 to 2030. It has the cash flow and financial flexibility to deploy its capital.
In a bearish market, investors are bearish about higher expenses, even when Pfizer is spending on research and development.
Since then, investors became more convinced that the pandemic is over. Even if Valneva has the best drug against covid with fewer side effects, people may still not want it.
In August, the company cut its revenue for the fiscal year. It cited lower Covid vaccine demand from the EU member states. In the first half of the year, the firm lost EUR 150.4 million. Since EU member states lowered order volume, Valneva suspended manufacturing of the vaccine. Furthermore, it took a EUR 100.6 million write-down.
Investors have no patience to hold a company that loses money. In this bearish environment, they demand profitable companies with strong prospects in the drug space. Demand for vaccines is weak worldwide. Valenva’s dependency on the European market hurts its potential market size.
Avoid VALN stock.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.