Vaccine Fatigue Can Give Your Portfolio a Booster

The declines have been driven by a sense that, as the Covid-19 emergency enters the rearview mirror, demand for boosters will continue to wane. Just last week, the European Commission cut the number of vaccines it is purchasing from Pfizer and BioNTech. Meanwhile, in the U.S., about 17% of the population has received the reformulated boosters that have been available since September. That is downright anemic when compared with a roughly 50% uptake rate for the flu shot most years.

The reasons few people are getting boosters are generally positive: Current Covid strains have been relatively mild and experts say most people have developed a degree of immunity by now. Global deaths and hospitalizations from Covid-19 are around their lowest since the start of the pandemic, and the World Health Organization recently declared the end of the global public health emergency.

Sentiment could change this winter but, for now, the number of people who say they plan to get shots has been on a steady decline, according to TD Cowen surveys. “For people who are relatively young and have no comorbidities, many feel like they’re just over this,” says Yaron Werber, a biotech analyst at TD Cowen.

The Covid-19 cliff is making investors jittery. Moderna made a cumulative profit of about $20 billion in 2021 and 2022—an astounding number for a small biotech. But analysts polled by FactSet now project the company will be unprofitable for the next four years as revenue drops and it ratchets up its research and development expenses.

Pfizer, meanwhile, is projected by analysts to see sales from its Covid-19 products—the vaccine and oral treatment Paxlovid—decline to just over $20 billion in 2023, down from more than $55 billion last year. And while prices per dose will increase as both companies shift from government purchase agreements to a commercial market in the U.S., investors are skeptical of Pfizer’s projection that revenue will rebound after a trough year in 2023.

Yet Covid-19 will remain a durable market for years to come, with a chunk of the elderly population likely continuing to vaccinate. While it is impossible to predict how the virus will evolve, Jefferies analysts estimate that the total Covid vaccine market will generate global sales of $8 billion by 2030.

“Because it’s a new virus and still evolving, many experts caution it is not to be underestimated and should be viewed as a seasonal infection as new variants may still emerge,” they wrote in a recent note.

Pfizer’s stock is trading roughly where it was before the pandemic began, though, as if the massive windfall from Covid-19 had never happened. It now has the highest dividend yield among big pharma companies—just over 4%—with one of the lowest price-to-earnings ratios. At these levels, there is more upside than downside to owning Pfizer, which has used its Covid riches to go on an acquisition spree.

And, just as their Covid franchises tail off, Moderna and Pfizer stand to gain from a new market that is now opening up for RSV vaccines. Respiratory syncytial virus, or RSV, can lead to serious health problems such as difficulty breathing and pneumonia for infants and older adults. The U.S. market opportunity could surpass $6 billion, according to Jefferies.

Moderna is a riskier investment, but that comes with the territory of being a biotech. One of its most exciting prospects is its partnership with Merck to develop a personalized vaccine for cancer. In recently released results, its vaccines, given in combination with Merck’s immunotherapy Keytruda, beat the immunotherapy alone. 

“We don’t know yet how large of a category this will be, but this data makes us think that personalized cancer vaccines could finally be here,” says Luca Issi,

Vaccine fatigue is real, but with new opportunities on the horizon and at least some percentage of the population likely to continue taking annual boosters, investors are too bearish on vaccine-makers.

Write to David Wainer at [email protected]