Since August, vaccine makers like Moderna and BioNTech have seen their share prices fall by two-thirds, or more. This seems odd, as Western governments have been ordering ever more Covid vaccines and coercing their citizens to get the jab.
By Louis-Vincent Gave of Gavekal Research, www.gavekal.com
In a world of sanitary passes, vaccine passports, and government and corporate mandates, one might have expected vaccine stocks to be the ultimate anti-fragile asset. Instead, Moderna’s share price is back at its late November 2020 level—basically when the vaccines were first announced. To put things in context, in 2020 Moderna’s revenue totaled $803 million; in 2021, that jumped 22 times to $17.9 billion, causing it to make a $6 billion profit and become a household brand. So why the poor recent stock performance against such a bullish backdrop?
One explanation for the “Covid vaccine pure-plays” behavior is that markets sometimes do silly things, and the recent pullback is just such an event. Perhaps the vaccine stocks simply became caught up in the broader US growth stock sell-off? The problem with this explanation is that the vaccine stocks began tanking in August, when the broader growth stock juggernaut was still motoring.
A second explanation is that vaccine stocks have sold off because the Covid vaccines have proven not to be the silver bullet that everyone hoped for. On this score, let me disclose a personal bias: when talking to anyone, I treat a shifting of the goal posts as a red flag. This human defense mechanism affects corporate bosses, portfolio managers and teenage children alike. After failing to achieve a particular goal, any one of us faces two choices: we can explain why we failed, which is unpleasant, or alternatively, we can change the goal to something that we did achieve.
The Vaccine Narrative
Which brings me to the vaccine narrative. At first, vaccines were supposed to prevent the user from catching Covid. The statement below is taken from a prominent medical journal and was referenced in BioNTech’s triumphant press release of December 10, 2020.
“In an ongoing multinational, placebo-controlled, observer-blinded, pivotal efficacy trial, we randomly assigned persons 16 years of age or older in a 1:1 ratio to receive two doses, 21 days apart, of either placebo or the BNT162b2 vaccine candidate (30 μg per dose). BNT162b2 is a lipid nanoparticle–formulated, nucleoside-modified RNA vaccine that encodes a prefusion stabilized, membrane-anchored SARS-CoV-2 full-length spike protein. The primary end points were efficacy of the vaccine against laboratory-confirmed Covid-19 and safety.”
The above is not that surprising since we have historically expected vaccines to stop people catching a disease. But unfortunately, vaccinated people kept getting, and spreading, Covid. As a double-jabbed, and boosted, Charles put it to his French-speaking audience of l’Institut des Libertés after his own bout of Covid a couple of months ago: “I take the measles shot to avoid getting measles and the tetanus shot to not contract tetanus. And I take the Covid shot to go to the cinema.” And it wasn’t just Charles who got Covid while vaccinated. So did millions of others around the world. The narrative thus had to change. And so the justification for a vaccine that did not fully protect its host became the need for our societies to reach herd immunity. In short, the vaccines would help stop the spread of the virus. But only if a large majority of the population took the needle. Hence the need for vaccine mandates.
Unfortunately, even as rich countries reached 70%-plus total vaccination rates, Covid continued to spread. So, the goal posts had to be moved again. The new messaging ran that while the vaccines did not prevent Covid, and did not prevent the spread of Covid, at least they moderated its impact on affected individuals. This would mean that vaccinated people would no longer need to go to the hospital. Which in turn would stop hospitals from being overwhelmed and thus our societies would no longer need to lock down (since the rationale behind the lockdowns was to prevent health systems from being overrun). And this is why, even if the risk of a Covid death for children, teenagers and young adults was small enough to be irrelevant, these tranches of populations still had to be vaccinated.