“The number of mutations are surprising,” Moderna co-founder Noubar Afeyan told Bloomberg Television, while discussing Omicron, the COVID variant which upended markets and forced traders to rethink their assumptions around central bank tightening late last week. “We have to take it for the serious threat that it poses.”
“There is no world” in which the effectiveness of the vaccines “is the same [as] we had with Delta,” Stephane Bancel, the company’s CEO, remarked, during an interview with the Financial Times. “I think it’s going to be a material drop,” he added, regarding the efficacy of existing vaccines against Omicron.
Although Bancel emphasized that he, like everyone else, “need[s] to wait for the data,” he cautioned that “all the scientists I’ve talked to… are like, ‘This is not going to be good’.”
Markets weren’t amused. Risk assets swooned anew on Tuesday, negating Monday’s rebound — at least for a time.
Although they surely didn’t intend to downplay the effectiveness of boosters, comments from Afeyan and Bancel appeared somewhat contradictory when juxtaposed with exhortations from public health officials for all fully vaccinated adults to receive a third shot as the best protection against Omicron.
Obviously, markets would much rather hear that the current vaccines provide enough protection against severe disease and death to make boosters an effective deterrent and to render the Omicron scare a “false alarm,” so to speak. If it turns out Moderna and Pfizer need to make new vaccines, that could mean weeks of uncertainty and serve as a material drag on sentiment.
Read more: Nosebleed Markets Ponder Uncertain Year-End In Latest Virus Panic
As Bloomberg suggested, Afeyan and Bancel really didn’t say anything “new.” “Bancel and Afeyan effectively reiterated comments made by Moderna’s Chief Medical Officer Paul Burton during the weekend,” an article read.
Nevertheless, markets are on edge. So, the new round of cautious remarks weren’t well received. Bancel also told FT that the working assumption had been that a variant with this many mutations would take at least another year to emerge. I’d reiterate that you don’t need to be a doctor or a scientist to conclude that if vaccination rates were higher globally, and especially in Africa, the conditions for mutations wouldn’t be as fertile.
Bancel’s musings on the timeline for a new, variant-specific vaccine somehow came across as less ambitious, even as he didn’t actually contradict previous comments from the company, which indicated a new shot could be ready early next year.
“[We] cannot get a billion doses next week,” he said, before mentioning the word “summer.”
There again, that isn’t what markets want to hear. Moderna’s shares surged on Friday and again on Monday (figure above) as investors effectively looked to price in the prospect of a new vaccine within two or three months.
According to Goldman, hedge funds had turned bearish on vaccine and testing stocks ahead of the Omicron scare. “Many hedge funds were caught off-guard,” the bank’s Asad Haider said, noting that funds were long re-opening stocks and had already sold stay-at-home favorites.
Mutual funds were likewise Underweight vaccine makers. Moderna and Pfizer counted among the most popular hedge fund Health Care shorts (table above).
In any event, Tuesday’s knee-jerk reaction across markets to comments from Moderna executives underscored the extent to which, at least for the next week or two, assets will be hostage to Omicron headlines.
I tried to post some thoughts on Omicron and drug effectiveness last Friday, but for some reason couldn’t. A little belated, but here goes. To save me typing, please insert “it appears likely that, in my opinion, based on preliminary information” in front of each statement below:
mRNA vaccines will still be fairly effective vs Omicron, but significantly less than vs Delta. Persons who have a weaker immune response post-vaccination will be more vulnerable to infection by Omicron. This includes older persons, very young children, and immunocompromised. However, even then vaccination will reduce severity of disease, often to mild.
Boosters greatly increase protection, and anyone who can should get one. Booster may restore effectiveness vs Omicron to close to effectiveness vs Delta levels, although it is unknown for how long.
Unvaccinated persons who are usually at low risk of severe disease from Delta will be at higher risk of severe disease from Omicron. This includes young persons and children.
Previous infection with Delta may not provide much protection against Omicron.
mRNA vaccines can be adjusted to regain effectiveness against Omicron, and this will be done expediently by both PFE and MRNA with revised vaccines likely to be available starting late 1Q22. To be crass, this is good for PFE and MRNA stock, and today’s weakness in those shares is a mis-reaction.
REGN and LLY mAb cocktails will be much less effective vs Omicron. Some other mAb cocktails will not be so affected.
PFE and MRK antivirals effectiveness will not be affected by Omicron.
It is still unclear if Omicron is more transmissible than Delta or will outcompete Delta in a Covid-naive population. SA trends seem to suggest it is but rapid rise of Omicron as % of Covid in SA could be explained by oversampling or by high degree of pre-existing exposure to Delta (see #4).
As reported by Reuters, the South African doctor, also the chair of the South African Medical Association, who first identified the possibility of a different strain of covid ( now referred to as Omicron) stated that the symptoms were ‘different from Delta, albeit “very mild”’.
The last part seems to have been ignored. Too early to know the impact on humans or the economy.