As autumn approaches, the potential demand for COVID vaccines is becoming a big question mark – and how it will develop could have a big impact for companies like Novavax (NASDAQ: NVAX) And Modern (NASDAQ: MRNA). These vaccine manufacturers rely heavily on revenue from their COVID-19 vaccines simply because they have nothing else to fall back on at the moment.
The challenge these companies face is that even with a new variant, BA.2.86, demand for their vaccines may not be very high, which could spell trouble for their supplies. Let’s see how this could play out for investors.
New variant: not as worrying as once feared
Initial reports of COVID variant BA.2.86 alarmed health officials, who feared another ommicron-like outbreak of COVID could occur in the fall and early 2024. The number of hospital admissions has increased; However, the percentage is still not nearly as high as in previous years.
Data on current hospitalizations in the US according to YCharts
Several studies have suggested that BA.2.86, also called Pirola, may not be a major problem. Dr. Bill Hanage, an epidemiologist at Harvard University, says, “This is not the second coming of Omicron. If it were, it’s safe to say we would know by now.” Dr. Eric Topol is a cardiologist and executive at Scripps Research and says a booster should suffice. “In the coming months, BA.2.86 may pick up even more mutations and behave differently, but right now it’s looking pretty good from a booster perspective.”
Even demand for boosters could be disappointing if the public doesn’t see a major reason to worry about the new variant. While hospitalizations are increasing, they may not be at a level that causes people to rush to get vaccinated. In the August edition of “What Worries the World?” from IPSOS, a market research firm, COVID-19 was near the bottom of the list, as issues related to inflation, poverty, violence and unemployment are much more pressing today.
New shots are coming, but will companies buy them?
Updated COVID shots, which target the But this time, the government won’t foot the bill for the shots. Whether or not he or she has to pay out of pocket will depend on a person’s health insurance.
That leads to a new headwind for demand: prices. COVID-19 vaccine manufacturers will charge much more for their doses. Reports indicate that shots were fired Pfizer and Moderna will cost between $110 and $130 per dose, a sharp increase from the roughly $30 per dose the government previously paid.
At a higher price, this could help COVID-19 vaccine makers offset the drop in demand. But the problem is that it could be harder for the companies that would consider paying for the vaccinations to justify coverage, especially if hospitalizations don’t increase dramatically.
Novavax and Moderna could be in a tough spot
Neither Novavax nor Moderna have done very well in recent quarters, and profitability is a big question mark for these companies. Although Novavax posted a profit last quarter, investors shouldn’t count on this continuing. The top and bottom lines could continue to struggle in the coming quarters.
NVAX revenue (quarterly) data per YCharts
Should You Avoid COVID Stocks?
Moderna and Novavax are expecting strong demand for their COVID shots. And if it turns out to be disappointing, investors can expect a sell-off. The situation is so worrying that Novavax said earlier this year that it might not even survive given the uncertainty about future demand.
While Pfizer’s businesses are diverse and acquisitions can help it continue to grow, Novavax and Moderna are riskier investments due to the unpredictability surrounding COVID demand. Investors should avoid these healthcare stocks as their businesses are not diverse and robust, and significant volatility could lie ahead for both companies.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Pfizer. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.
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