Traders’ Vaccine-Stock Giddiness Fades Amid Doubts on Road Ahead

(Bloomberg) -- The initial blast of enthusiasm for stocks linked to Covid-19 vaccines triggered by key milestones in their development is quickly fading as investors assess the challenges they still face in becoming commercially successful.

Wall Street analysts can’t quite gauge when or how sales will peak because it’s unknown how long vaccines will be effective, whether they’ll be needed more than once or even if those who have been vaccinated will continue to spread the virus. Forecasts on when the U.S. might reach herd immunity, potentially obliviating the need for inoculations, also run the gamut, though Anthony Fauci, the nation’s top U.S. infectious disease doctor, says things could be “approaching normal” by late next year. That’s prompted a retreat among many of the retail investors who had piled in to biotech stocks.

All the unanswered questions have led to a slow leak in a biotech bubble. BioNTech SE dropped back below its summer highs in the three days following positive late-stage results with partner Pfizer Inc. Moderna Inc.’s run was even shorter. It fell below July’s record the day after its data. Companies playing catch-up with the vaccine front-runners including Inovio Pharmaceuticals Inc., Novavax Inc, Arcturus Therapeutics Holdings Inc. and CureVac NV have similarly lost momentum.

Throughout the eight-month pandemic, any news of progress toward an inoculation or effective treatment has been met with huge investor enthusiasm, often leading to record surges in share prices. But those extreme gains are unlikely to hold as the effort to develop medical solutions enter the final stages, according to Jared Holz of the Jefferies trading desk.

“The easy portion of this Covid-19 trade is (mostly) over,” Holz wrote in a note to clients on Thursday. “As more and more programs read out, we believe this can only put pressure on economics for the vaccine companies.” He recommend investors sell the news for vaccine stocks.

©2020 Bloomberg L.P.