I’ve received an increasing number of client inquiries asking if we recommend investing money in vaccine stocks. As we’ve seen with the price of gold and the build up in tech valuations, the higher a trend goes the more it can feel like we’re missing out. Especially with so much hope hinging on expectations that a vaccine could be the panacea we desperately need – the thing that could allow us all to resume a normal existence, so we can begin recovering economically. A huge amount of excitement surrounds the stocks whose company names dominate the headlines. Despite the abundance of optimism, the volatility in this space accurately reflects the level of uncertainty we have as to the outcome of the race to find a successful vaccine.
There are currently 170 research teams across the globe racing to find a feasible solution to our pandemic dilemma. As this first wave of vaccines has been pushed through stages of development, a typically long and arduous process has been sped up to double time. According to Barron’s, investors have wagered $100 billion on vaccine stocks so far. This represents a rough estimate of how much the stock market values the products currently in development. With such great expectations, it can be easy to lose sight of the fact that medical science is a process of trial and error; it takes a lot of failures to get something like this right.
Most candidate vaccines fail before they ever reach human trials. Of those that make it through, few make it to the final stages. Along this expedited timeline, hyper-scrutiny means that small bits of news can have a great impact on a stock’s perceived value and price movements. And even those that seem to be surpassing many hurdles and leading the pack can lose their standing with a single stumble.
AstraZeneca and Oxford University, a favored corporate/academic duo, were forced to pause their vaccine study in Phase 3 when one of their participants suffered a “suspected” serious adverse reaction. As they seek to parse the cause of this reaction, whether their vaccine or some external factor, their stock price may continue to lose ground.
Sometimes just the threat of falling behind the competition is enough to cause a sharp decrease in price, as we’ve seen with Moderna. A recent start-up in the biotech space, they’ve become a household name this year…even though they have no existing products on the market. After peaking in price on July 17th, it seems their stock may be headed lower upon news that other firms may be edging closer to the finish line.
Of course, we would be remiss to neglect stating the obvious: it’s unlikely that anyone will create a silver bullet on their first try. Even a vaccine that receives ultimate approval may be too weak, or require various refinements to be truly effective. All of this is to say there’s no fast and sure method to pick a winner. If you’re willing to take the risk of investing in one of these companies at this late stage, we would recommend bracing for continued volatility as the rollercoaster ride continues.