The highly encouraging progress of the COVID-19 vaccine candidate developed by Pfizer Inc. (NYSE:PFE) and BioNTech (NASDAQ:BNTX) released earlier this week has prompted a sell-off in stocks that have otherwise thrived during the pandemic.
While Pfizer is applying for emergency regulatory approval in the US next week, this doesn’t mean that the end of the tunnel is near.
In fact, we are still likely to need the products provided the very companies that many investors 'rotated' out of earlier in the week, namely diagnostics and treatment.
Diagnostics are going to continue to be important even after vaccines are distributed so clinicians can monitor their impact on people, as points out Adam Barker, analyst at Shore Capital, while testing will also remain vital in order to reduce hospitalisations.
“Vaccines won’t work in everyone and they’ll take time to distribute widely,” he told Proactive. “Similarly, the virus may develop mutations which temporarily reduce the vaccine efficacy and we have no idea how long vaccine-induced immunity lasts.
“As such, it would be wise to continue the development of therapeutics, given they will vital for saving lives.”
Countries will still want to stockpile Synairgen’s candidate SNG001, for example, analysts at FinnCap (LON:FCAP) pointed out, because there is currently no broad-spectrum antiviral and there is no data on how effective this vaccine is on elderly or sick people.
There will be a mixture of vaccines, therapeutics, testing and behaviours such as distancing needed, Barker added.
“We’ll need all of these to bring the pandemic to an end,” Barker says.
“Although a vaccine is a major component of this, whilst there’s still uncertainty around efficacy and duration of protection (particularly in vulnerable subgroups), we shouldn’t take our eye off the ball with respect to novel therapeutics and diagnostics.”
Testing and treatment specialists
One of the most notable yo-yos this week was Novacyt SA (LON:NCYT), one of the pioneers of COVID-19 testing, which lost over a third of its value on Monday and is now trading at around 25% below last week’s level, having rocketed over 58-fold since January when it was changing hands for 14p.
Fellow diagnostics firms Sensyne Health PLC (LON:SENS), which is cooperating with the University of Oxford for a study on assays, Omega Diagnostics Group PLC (LON:ODX), Avacta Group PLC (LON:AVCT), genedrive PLC (LON:GDR) and Braveheart Investment Group PLC (LON:BRH) were also victims of the sell-off.
Investor Braveheart, whose portfolio company Paraytec is developing a fast COVID-19 screening technology, noted that the world still urgently needs to test for the virus.
“The directors' expectation is that any vaccine that becomes available to protect against COVID-19 will be, initially at least, used for the protection of frontline health workers and the very vulnerable,” the company said.
“The directors, therefore, believe that the best way to protect the rest of the population will be to allow mass testing. This is what Paraytec's test is focused on achieving.”
Immunisation doesn’t happen overnight
When Pfizer’s vaccine is approved soon, the US pharma giant has plans to produce 50mln doses globally this year, 10mln of which should be allocated to the UK.
However, manufacturing and distribution are going to be complex.
Every batch has to be quality assured before release, while the formulation requires two doses, three weeks apart, before it can be effective and must be stored at ultra-cold storage, below -80°C.
The rollout campaign would naturally be slow and anti-vaccination movements are going to be a further hindrance.
Herd immunity would require 60-70% of the global population to be immune, which is around 5bn people.
“Even if a vaccine is perfectly effective, this will take years. Until then, the vast majority of the population will need to rely on treatments and testing for COVID-19,” the finnCap analysts say.
“A vaccine is a major tool in the fight against this disease, but it cannot be the only one.”
As they point out, demand for effective treatments and convenient testing is already outstripping supply and is likely to continue to do so into 2021 and perhaps beyond.
While further positive vaccine news may prompt new sell-offs, investors may want to think twice on value of those stocks in the longer term.