Why did the share prices of Pfizer and Moderna plunge despite the “gold mine” of a COVID-19 vaccine?

After spectacular growth in 2021 thanks to the success of vaccine against COVID-19 and strong sales, things seem to have reversed in 2022 for the trio of pharmaceutical giants.

The share price of Pfizer (PFE) has dropped about 15% while that of its partner BioNTech (BNTX) has also dropped 35% in value. For Moderna (MRNA), the situation is even worse with a drop of more than 40%.

Strategy “Buy the rumor, sell the truth”

So what is the reason for this? Of course, the problem doesn’t come from selling the COVID-19 vaccine.

Pfizer said it expects revenue from the Comirnaty vaccine, split equally with BioNTech, to reach $32 billion by 2022, while Moderna forecasts it could generate nearly $20 billion in revenue from sales of the SARS virus vaccine. -CoV-2 this year.

Observers believe that part of the reason for the above drop is that investors are implementing the “Buy the rumor and sell the news” trading strategy.

Professional traders in the stock and forex markets often base their trading strategies on what they believe will come true when predicting a company’s financial statements or a business event. upcoming economy.

When they buy stocks/foreign currencies based on such a prediction, it is the “buy the rumor” phase. Once the official report is released or the event they expect happens, the “rumor” becomes the “fact”. This is when the trader sells the asset to the market.

“Buying” when in the “rumor” stage and “selling” when the prediction becomes “true” sounds risky, but it is a pretty smart strategy and has been applied by investors since long.

Pfizer, BioNTech and Moderna’s revenue surged in 2021, but now these three corporations are facing the risk of slowing down and now is the time for investors to consider selling assets.

Moderna’s COVID-19 vaccine. Photo: Reuters

Diversification anxiety

Pfizer’s share price is up more than 60% last year, while BioNTech’s share price is up more than 215% and Moderna’s share price is up nearly 145%. The benefits of producing and distributing a COVID-19 vaccine, especially for shares of Pfizer and BioNTech, remain large.

Health regulators in the US approved a booster dose of the Pfizer/BioNTech vaccine for children aged 5 to 11 years old earlier this week. Additionally, Pfizer’s stock price could also benefit from the approval of the SARS-CoV-2 antiviral drug Paxlovid late last year. Pfizer said it expects $22 billion in revenue from Paxlovid this year.

Pfizer is also a corporation that has more conditions to continue to develop after COVID-19 than the other two manufacturers. The group announced plans to acquire migraine drug maker Biohaven (BHVN) for nearly $12 billion earlier this month.

“This deal is a positive investment for Pfizer to leverage its huge cash reserves to produce an approved drug that is taking over the market,” said Stewart Glickman, an analyst at CFRA Research. growing share of the market and can help increase revenue in a meaningful way.”

Earlier, Pfizer also reached an agreement to buy the immuno-inflammatory drug development company Arena Pharmaceuticals, worth nearly $ 7 billion, late last year. Pfizer also acquired cancer drug maker Trillium Therapeutics in 2021 for more than $2 billion, and after all of these deals, the company still has about $24 billion in cash on its balance sheet.

Pfizer’s diversification is one of the main reasons analysts expect that the company’s revenue will grow by nearly 30% this year, and earnings per share will increase by more than 50%.

Meanwhile, Moderna, which doesn’t have the diversity of Pfizer, is looking for another growth driver. Nearly 97% of Moderna’s revenue in the first quarter of 2022 came from COVID-19 vaccines. Moderna’s sales are expected to grow about 20% this year, but analysts expect profits to fall.

Chief Executive Officer Stéphane Bancel said during Moderna’s most recent earnings call that two of the company’s top goals were “to expand beyond vaccines, towards providing therapeutic solutions.” ” and look for mergers and acquisitions.

Moderna is also working on vaccines against other viruses, such as HIV and Epstein-Barr (the virus that causes herpes in humans).

However, Moderna has recently run into a major public relations trouble. The company’s new CFO was forced to resign just days after taking office, after several financial irregularities were revealed during an investigation at his former company, Dentsply Sirona (XRAY), a manufacturer of X-ray machines and other dental equipment.

Meanwhile, BioNTech, like Moderna, is also facing some difficulties as nearly all of its revenue in the first quarter comes from the Comirnaty vaccine. By comparison, Pfizer only generated about half of its vaccine revenue in the first quarter of the year.

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