How Will A Vaccine Affect The Stock Market?

As 2020 comes to a close, one thing is certain: this is a year investors will never forget. From historic highs to dizzying lows – and back to historic highs again – the volatility has had everyone on the edge of their seats. 

The root cause of this unpredictable market behavior can be traced directly to COVID-19, so it stands to reason that any vaccine-related news adds to the ups and downs. For example, an early September announcement that AstraZeneca’s clinical trials were placed on hold showed up in share prices – and in the market as whole.

Of course, announcements that Pfizer (PFE) and Moderna (MRNA) vaccines showed efficacy rates greater than 90 percent had the opposite effect. 

It is clear to investors that there are gains to be realized from vaccine-related stocks, but exactly which ones are the most likely to deliver strong returns remains unclear. Industry experts and analysts are working hard to answer the big question – how will a vaccine affect the stock market? – and they are trying to pinpoint which companies stand to gain the most. 

These five biotechs are currently regarded as top contenders for delivering vaccines that contain the novel coronavirus for good. 

Pfizer Vaccine Is The Tip Of The Iceberg

The Pfizer vaccine is currently leading the way when it comes to controlling the pandemic.

It was first to be approved in the United Kingdom, Canada, and the United State, and high-risk populations are already receiving their first doses.

However, there is more to Pfizer than the COVID vaccine, which makes this stock particularly appealing. 

In addition to short-term gains achieved through this current in-demand product, Pfizer has a strong future in the larger vaccine market.

The COVID vaccine was developed through the use of new messenger RNA (mRNA) technology, and is one of the first of its kind. The technology is transferable to other types of disease, which means many more vaccines could be forthcoming.

Moderna Vaccine Could Steal The Limelight

The Moderna vaccine, which also uses messenger RNA (mRNA) technology, is hot on the heels of Pfizer.

It is as effective – if not more effective – and it doesn’t need to be stored at deep-freeze temperatures. There isn’t enough Pfizer vaccine to go around, so there will be plenty of demand for Moderna’s version once approved. 

In fact, when it comes to less-developed nations, Moderna’s simpler storage and transportation requirements may make it a top contender.

That means at least short-term, Moderna’s stock is likely to grow. If the company uses its newfound understanding of mRNA to address other types of disease, the company’s long-term prospects are virtually unlimited.

Astrazeneca Vaccine Trials Paused On Concerns

The story of Astrazeneca’s vaccine hasn’t been quite as rosy as Pfizer and Moderna’s.

The company paused its clinical trials due to an alarming patient outcome, and the vaccine’s efficacy rates are roughly 20 percent lower according to initial data.

Perhaps more worrisome is the fact that there was a dosing error in one of the clinical trials that actually delivered better results than the accurate dose would have. The company hasn’t provided an explanation for this phenomenon, which has a lot of folks asking questions. 

On the plus side, the Astrazeneca is far and away the biggest winner in terms of affordability and storage.

It costs roughly $2.50 per dose vs. Pfizer and Moderna’s $30 – $40 per dose, and it can be stored in a typical refrigerator.

For many nations, those two factors will mean the difference between successful distribution and leaving large groups completely unprotected. 

COVID vaccine aside, Astrazeneca is an industry leader, and it has a wide range of drug candidates in its pipeline that could solve some of the world’s most deadly and debilitating diseases.

However, for the past two decades, it has grown around 2.5 percent per year. That figure is expected to increase in coming years – perhaps as much as 19 percent per year – but that’s not yet proven.

For most investors, other options hold far more promise. 

Merck Vaccine Has Buffett’s Vote Of Confidence

Merck took a different approach to the COVID vaccine than did its industry peers. Instead of jumping into the fray with full-speed-ahead development in an effort to be first, this pharmaceutical giant took a step back.

After surveying the landscape, it finally started to work on alternative methods of delivery that address the Pfizer (PFE) and Moderna (MRNA) shortfalls. 

The Merck vaccine candidates are intended to protect in a single dose, versus the two doses required for mRNA vaccines.

Further, they won’t require freezing temperatures for storage and delivery, which makes them far more versatile.

Finally, one of the Merck vaccine candidates might not require a needle-prick at all. The company is experimenting with an oral drug that could be wildly popular among both children and adults. 

Merck’s robust pipeline, its unique approach to a COVID vaccine, and its industry partnerships make it a solid contender for reliable growth, both in the short-term and long-term.

It’s worth noting that investing genius Warren Buffett clearly believes in Merck, as he added shares to the Berkshire Hathaway portfolio in the third quarter of 2020.

Novavax Vaccine Is A High Reward, High Risk Gambit

Novavax is a tiny company that is fully focused on creating vaccines to prevent the world’s most deadly diseases. It has developed a unique technology to get the job done, and it has been hard at work on bringing vaccine candidates to market. 

Unfortunately, to date, it hasn’t seen much success. A couple of years ago, its two most promising vaccine candidates failed in clinical trials, and share prices dropped to under a dollar. However, the Novavax vaccine for COVID could turn things around for this company, generating massive returns for shareholders. 

As of early December, Novavax fully enrolled participants in large-scale Phase III clinical trials. Investors willing to accept substantial risk might win big if those trials prove the Novavax vaccine is effective. 

The bottom line is that most analysts agree 2021 will be a much stronger year for the market as a whole. Though the S&P 500 gained less than 14 percent in 2020, it’s expected to reach 30 percent growth in the coming 12-month period. 

Vaccine-related biotech stocks will certainly play a role in driving those gains, and many investors have decided now is the time to buy in. If you are one of them, just keep in mind that as the economy returns to a steady state, there will be gains in other sectors as well – particularly those hardest hit by the global pandemic. That means a balanced, diversified portfolio is still the smartest way to invest. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.