The biggest names in Covid are updating their vaccines for a fall campaign, but that might not be enough to bolster the down-in-the-dumps stock prices of Pfizer, Moderna and Novavax.
There are several complicating factors facing Pfizer, Moderna and Novavax, the three companies the Food and Drug Administration has tapped to launch updated Covid booster shots. First, the variant selected for those boosters is no longer dominant in the U.S. The companies, though, say that's not a problem. Their vaccines will still work.
The other problem is more nuanced. What will demand look like for these updated shots?
Pfizer Chief Executive Albert Bourla says launching the updated booster shot will be key indicator for demand in future years. During the company's second-quarter earnings conference call, he said Pfizer is "acutely aware" of the uncertainties affecting the company and Pfizer stock.
"The good news is we will have much more clarity and certainty regarding how our Covid-19 products will perform in a commercial market by the time we report our third-quarter financial results, and we expect the uncertainties to be largely eliminated by the end of the year," he said.
Meanwhile, Pfizer stock has fallen 31% this year and Moderna stock has slumped 39%. Novavax stock has dropped 18%.
Pfizer Stock: A Change In Booster Strategy
The updated vaccines will be a departure from the last round of booster shots. Pfizer said on its second-quarter earnings call that it expects to launch the updated shot in September.
Pfizer with partner BioNTech, as well as Moderna and Novavax plan to launch Covid booster shots targeting a subvariant of omicron called XBB.1.5. That makes them monovalent vaccines, meaning they target just one strain of the virus that causes Covid. The current updated booster shot is a bivalent vaccine. It targets multiple strains known as B.A.4, B.A.5 and the ancestral virus.
But keeping up with the rapid mutations behind the Covid-causing virus remains as tricky now as it did in 2020. That's as troublesome now for Pfizer stock and Moderna stock as it was then.
Today, the dominant strain is a subvariant of omicron called XBB.1.16. From July 9 to July 22, it accounted for 14.8% of all Covid cases sequenced in the U.S., according to the CDC. Meanwhile, XBB.1.5 accounted for just 12.3% of cases in the same time span. Another strain called XBB.2.3 is also gaining steam, accounting for 13% of cases.
The companies say their updated boosters have shown promise in lab testing against all three of the strains.
"We're confident that our updated monovalent, if authorized and approved, would provide adequate protection," Pfizer spokeswoman Jerica Pitts said in an email to Investor's Business Daily. "The amino acid sequences for XBB.1.5, XBB.1.16 and XBB.2.3 are all very close."
Moderna spokesman Christopher Ridley noted the booster in development can handle all XBB sub-lineages. There's no reduction in neutralizing antibodies capable of handling XBB.1.16 or other XBB subvariants, he said in an email.
"In other words, the XBB.1.5 vaccine is equally effective in protecting against XBB.1.16 as it is vs. XBB.1.5," Ridley said.
Moderna Stock: Is There Any Demand?
But demand remains a challenge for each of the Covid vaccines. According to the Centers for Disease Control and Prevention, just 17% of the U.S. population — age six months and older — received one of the first round of updated boosters as of mid-May.
Leerink Partners analyst Daina Graybosch says Novavax could have an edge here. Novavax's shot is based on protein technology, rather than the messenger RNA platforms that back shots from Pfizer and Moderna. Experts say Novavax's approach could appeal to people who are hesitant to receive shots using the newer messenger RNA technology.
"This choice also provides Novavax an opportunity to be more competitive in the U.S. booster market," she said in a recent note.
She rates BioNTech stock with an outperform. Other Leerink analysts have market perform and underperform ratings on Pfizer stock and Moderna stock, respectively.
Novavax didn't participate in the updated booster round, meaning people in the U.S. could only choose from the updated Pfizer and Moderna shots. As of May 11 — the last day of the public health emergency in the U.S. — just 44% of people age 65 and older received an updated booster shot. Researchers consider that age group the most at-risk for severe complications from Covid.
Where Pfizer Stock, Others Stand Now
At the same time, Pfizer stock has trended lower. Since mid-June, shares have been ensconced below their 50-day moving average, according to MarketSmith.com. Moderna stock has been below that point since April, with several unsuccessful runs at it. Novavax stock has the lowest IBD Digital ratings of all three, though it now is above its 50-day line.
Still, analysts are bearish on the chances of strong demand for their Covid boosters.
Wall Street expects Pfizer, the de facto godfather of the Covid vaccines and treatment landscape, to experience a 65% drop in revenue from its Covid shot this year, to $13.2 billion. Likewise, they forecast Moderna's sales will plunge 65% to $6.43 billion, according to FactSet. Moderna just raised its outlook and now expects $6 billion to $8 billion in sales this year.
Novavax stock analysts, on the other hand, expect the company to report a smaller 27.5% decline to $1.44 billion in sales. It's important to note, the Covid vaccines are Novavax's and Moderna's only sales-making products.
Pfizer is a powerhouse pharma with plenty of products to help offset the Covid decline. Still, analysts expect overall sales for Pfizer to tumble by about a third this year.
A Trough Year For Shot Makers
In a recent conversation with RBC Capital Markets analyst Luca Issi, Moderna's head of investor relations, Lavina Talukdar, said 2023 will be a trough year. The company has forecast a floor of $6 billion in sales of its Covid shot this year, below already bearish Street forecasts.
But Talukdar contends Covid is likely to become a seasonal occurrence, according to a report from Issi.
"Moderna acknowledges revenue levels are transitioning from pandemic to endemic, and there are a lot of unknowns around what the endemic phase of Covid will look like as this is the first time anyone in the industry is going through this," Issi said.
He has a neutral rating on Moderna stock and doesn't follow either Pfizer or Novavax stock.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
