COVID-19 Omicron Variant: Analysts Discuss Which Biopharma Stock is Best Positioned

November 30, 2021 7:11 AM EST
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After the WHO yesterday flagged the Omicron variant as concerning and “high risk,” markets have dipped this morning on fresh warning from Moderna’s CEO (NASDAQ: MRNA) about the effectiveness of existing vaccines.

"Omicron has an unprecedented number of spike mutations, some of which are concerning for their potential impact on the trajectory of the pandemic," the WHO said in its technical brief sent to nation members.

Oppenheimer analyst Hartaj Singh believes the new variant will add to uncertainty heading into the year-end. The analyst reminded investors that prior experience shows biotech companies need 1-2 months to identify and assess responses against new variants.

“As we see it, there could three main scenarios regarding 2022/23 numbers for COVID-19-related names. (1) Omicron is classified a Variant of High Concern (vs. VOC currently) or even an "escape variant," requiring a completely new class of mRNA- and vector-based vaccines. (2) Omicron remains a variant of concern with acceptable efficacy of current vaccines, but new vaccines are needed over time. (3) Like Delta before it, vaccine efficacy is reduced but a combination of prime/boost followed by boosters remains the go-to strategy by governments and regulators worldwide,” the analyst said in a client note.

Singh believes unvaccinated and those eligible for a booster dose may rush to get a jab and gain immunity as Omicron spreads around the globe.

In case scenario two is in play, Singh expects the mRNA vaccine manufacturers to perform better than the older platforms (vector-based, protein subunit, etc.) due to the speed and precision of the mRNA approach and command higher multiples. In this scenario, we would also expect companies with analogous approaches to mRNA—like Inovio (INO) with its DNA-based approach— to also benefit.”

Similarly, BMO Capital Market analyst Evan David Seigerman shared key takeaways from his conversation with Dr. Don Diamond, a Professor of Hematology & Hematopoietic Cell Transplantation City Of Hope.

Diamond stressed that existing vaccines and newer antivirals “would continue to provide a level of effectiveness, but uncertain for the protection from the antibody cocktails.”

“If a new vaccine is required, he thought one could be made and approved (EUA) quickly but due to supply constraints could take 3-4 months to roll out. Dr. Diamond emphasized the importance of vaccination (initial course + booster) now with the current mRNA-based vaccines (Pfizer/BioNTech and Moderna) as the best way to protect against the new variant. He also believed that wide-spread global vaccination is the way out of the pandemic,” Seigerman wrote in his report.

Besides vaccines, antivirals are expected to work against all variants, but antibody cocktails are less certain, according to Dr. Diamond.

Pfizer (NYSE: PFE) shares are up over 1% in pre-open Tuesday while BioNTech (NASDAQ: BNTX) stock is down 6.6%. Moderna shares are also down nearly 4%.

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