Investors Need to be Pause Before Betting on Covid-19 Vaccine

Covid-19 Vaccine

In the midst of the COVID-19 outbreak, with the world clamoring for a vaccine against this, many investors are hoping to cash in on this. It may not be all that exciting though.

Investing in stocks that promise more effective, or at least more profitable medical treatments can seem like a pretty exciting prospect at first glance, to get in early on the next big drug that will make your company billions and see your stock soar.

The world of biotech investing is one that plenty of investors already find to be alluring, but when the world has been overwhelmed by a pandemic and companies are rushing to come up with a treatment or vaccine, this can be seen to really up the stakes and be seen as making investing in the companies all the more potentially lucrative.

It takes a long time to develop novel drugs to treat conditions though, not the least of which is the time spent to come up with treatments. It takes years to bring a new drug to market after it is discovered, and we need to discover one that has enough potential to merit clinical trials first.

In seeking treatments, we’re limited now to repurposing existing drugs that are used to treat viral infections, such as hydroxychloroquine and Remdesivir. There’s no real money to be made from hydroxychloroquine, regardless of how effective it might be, and Remdesivir hasn’t shown itself to be all that promising, with only slight improvements in outcomes.

The mad dash to come up with a vaccine for COVID-19 is another story though, with the potential to sell billions of doses sending drug companies scurrying to get one ready for widespread use. Pharmaceutical companies large and small have stepped up to the line in this race, at a pace which is described as the biggest collaboration since the Manhattan Project and one that will proceed at “warp speed.”

There are some serious health concerns out there about rushing this too much, where the term “warp” might be more appropriate than we would wish, a speed that may indeed warp health outcomes if things don’t go too well.

Aside from the potential health implications of this, from an investor point of view, too much haste is one of the risks that we have to bear when we bet on this, and due to the speed involved in getting this to market, the implications may not surface until the program is well underway, in what they call the post marketing phase.

One of the biggest concerns is that due to the nature of coronaviruses, coming up with a vaccine that treats these particular viruses effectively is a very tricky proposition. The biggest challenge here is to come up with one that does not place people even more at risk for the ravages of COVID-19, and there is much to worry about here.

When people such as Dr. Paul Offit, a leading proponent of vaccines and the co-developer of the rotavirus vaccine becomes concerned enough to speak out, this is definitely something we need to pay attention to. He is really preaching caution in ensuring that we test these vaccines for safety enough, particularly due to the risk of such a vaccine stimulating our immune system too much, but this is likely to fall upon deaf ears, as you don’t hear these things at warp speed.

The issue under examination is the propensity of coronaviruses to be subject to what is called immune enhancement, which sounds like a good thing until you consider that the symptoms of viral infections aren’t so much from the virus itself as they are from the body’s response to it.

Among other things, in the presence of infection, the body increases inflammation, which helps it control the infection. We don’t want too much of this though as this can be dangerous, where the body not only attacks the virus but rages against itself by way of an acute autoimmune attack called a cytokine storm. Enhancing the immune response is therefore not always a good thing.

COVID-19 already is noteworthy enough for its propensity to cause these inflammatory storms, and this really sets it apart from less virulent contagions. This is what puts people in the hospital, on ventilators, and what kills them. This is what separates those who just get symptoms of a cold or the flu or perhaps no symptoms at all from those who get put in a real health crisis.

The immune system exists in a delicate balance between not enough of an immune response and too much of one, and we need to fear overreactions as well as underreactions, and perhaps more. There is a litany of serious conditions caused by an immune system out of control, autoimmune diseases as they call them, and there are already plenty of fears that our program of childhood inoculation may be overstimulating the immune systems of these children and at least playing a role in the explosion of the incidence of autoimmune conditions among children that we have seen over the past few decades, a time where childhood vaccination has also exploded in magnitude.

We have both animal and human studies that suggest that this may be a big risk with any potential coronavirus vaccine, where the desired antibodies are created, the patient gets infected with the virus, and the effect of the infection is made much worse. They have a nice sounding name for this, the enhancement effect, and when vaccine experts such as Dr. Offit, who is as pro-vaccine as they come, are warning us to be careful of this, we really need to pay attention.

Rushing a Vaccine Increases Investment Risk

The real risk here with rushing things is that if we don’t vet this enough, moving at warp speed, we may only discover this grim effect after a great many people encounter the disease after vaccination, leading to not only a real health crisis but an investment one as well, as this would not be so good for your stock either.

Normally, this may not be that much of a concern, but coronaviruses have been marked as particularly susceptible to this enhanced response that vaccines can cause, being more prone than other viruses to stimulate the body to attack itself in a dangerous way as it does to those who are most affected by it naturally. This may cause those who otherwise would be able to deal with the infection to get serious symptoms, and those who already get them could have them worsened, not a pleasant thing to do with a virus that already can be so fatal.

Hydroxychloroquine works against COVID-19 and other infectious diseases by turning down our immune response in cases where it has gotten too out of hand, and is why we see patients improve so dramatically in the first few hours of treatment, by reducing the massive cytokine production that this infection can produce. This is why it has proven so effective in treating lupus and rheumatoid arthritis, conditions that do their dirty work by having our immune systems overstimulated.

We may wonder why we are looking at ramping up the immune system with vaccines when it has been fairly clear that this infection harms us through having some of us over-adapt, where those who do not are fine. We might want to look in that direction instead, seeking out other methods to control the inflammatory storms that are taking so many lives, and we can only hope that one day we’ll spend a lot more time looking for a way to better manage these attacks when they occur, where people get the care they need to save their lives when these things happen.

Given that the great majority of patients who are infected by COVID-19 see their conditions resolve without any real incident, and those who do fall prey to it more and are at serious risk do so from their immune systems getting too much out of control, we may wonder whether looking to enhance immunity by way of a vaccine is even a sensible approach to be used broadly.

It might have applications with those who actually might use the help, those who are immunocompromised, but we still need to be careful because these are the folks that are the most at risk for autoimmune stimulation because their immune systems are much more poorly regulated. Vaccines will not serve to help those who get attacked by autoimmune responses, which is the pointy end of this virus, and could very well make this worse. We need to well consider this before seeing these things as any sort of savior or even possibly helpful.

We especially wonder what sense it would make to seek to vaccinate the public at large against this virus, giving it to relatively healthy people where the risk of becoming seriously ill from this virus is so negligent. In addition to the risks of immune enhancement, potentially taking people who would have fought off this infection quite appropriately and easily now being stimulated to overreact and attack their own bodies as well, there are other risks involved, and some potentially significant ones given that this is involves the first trials ever of an RNA vaccine.

Several of the vaccines in the game work not by stimulating antibodies directly but instead by changing our DNA to promote the antibody response. Since this changes our DNA for life and even gets passed on to future generations, and given the potential for this to change our immune response for the worse, these are treatments that we need to proceed with a lot of caution with, which warp speed sets aside.

We also need to consider the prospect of the coronavirus mutating along the way, which is actually the only way that it could survive long enough to still be around in the time that it takes to get a vaccine minimally ready for market. By then, the virus that the vaccine has been shown to treat might have evolved differently enough that the vaccine just doesn’t work well with this new evolution.

The biggest threat to the commercialization of COVID-19 vaccines though is that, by way of our achieving natural immunity from it, a vaccine may not be needed at all by the time that one is ready. With the warp speed that this virus has spread and continues to spread, something that we have been virtually powerless to stop, it is even difficult to imagine this virus not simply running out of new patients to infect and dying off on its own that way well before we ever dare to roll a vaccine out to the public.

There’s also the sheer number of candidates to compete for this vaccine cup, and even though it might be the case that several emerge as winners, investing in a company that risks committing so much money and so many resources to this and losing is a very real threat.

Pharmaceutical companies usually only need to worry about failure, where billions might be spent on a drug that never makes it to market for a variety of reasons, but with a coronavirus vaccine, the risk that you may succeed but yours might not be chosen to be licensed adds considerably to the overall risk.

This Doesn’t Mean We Should Avoid Health Care Stocks Though

Given all the other investment choices we have, betting on a stock that we think might really rise if they manage to get a piece of this vaccine economy that many are foreseeing seems like a pretty risky choice indeed. The consensus is that companies will not seek to profit from a vaccine while this pandemic is still ongoing, and when it is over, we need to wonder why we would even need such a thing.

We may still wish to invest in the health care industry for other reasons, but definitely want to carefully consider the risk reward ratio when considering doing so to seek to capitalize on what appears to be a vaccine bonanza but may instead involve taking on too much risk for too little additional returns.

This whole thing might end up being considerably less exciting for pharmaceutical stocks overall than we might initially guess, when we account for all of the money being spent on this in the industry. There is far too much uncertainty surrounding how a COVID-19 vaccine will play out, no matter how badly a lot of people want it.

A little understanding can go a long way though, and as challenging as the times have become, we still need to do our diligence as investors to go beyond the precognitive approach that most people take to this vaccine and at least dig a little deeper into the issue to have a better idea of what we are putting our money on.

Upon closer examination, betting on vaccines does not appear to be a good use of our investment funds, turning our investing too much into gambling and on a bet that doesn’t even look like a very good one at this point. If we are ready to invest in health care, it would be not because of this, but in spite of it, as the pursuit of a vaccine does not appear to be a net positive for the industry for now anyway when both potential returns and risks are calculated, as they must be.

We also want to be aware that the health care sector is far from immune from market pullbacks, even when precipitated by such a health crisis as we now are in. The health care sector did fare better than other sectors, but still gave back 20% for a time, which really demonstrates the fact that bears attack all stocks when they appear, even ones that you would think should go up. The same happened to Amazon, who went down even more, even though the lockdown was a real godsend for them.

The sector has mostly gained back its losses though, but we need to remember that we’re still in a pretty bearish environment even though we’ve come so far from the lows. Many are cautioning against new investment in stocks right now, and this has to do with timing, where a month ago would have involved good timing but right now may not, as stocks get too close to before the crisis with it still raging.

We still like the health care sector longer-term, it’s just that the risks over the next few months have to be accounted for as well, although if you really need to be in a sector right now, this is clearly a better choice than just about all the rest, vaccine or no vaccine.

This is actually a very good example of why we should seek to spread our stock risk around by investing in a sector instead like the Health Care Sector Select SPDR ETF, and this is considerably more important with this sector than with other ones like the tech sector where we can pick and choose with more confidence.

Health care stocks are more of a hit or miss thing, and the race for a vaccine is a perfect example of this playing out, but there are always winners and losers in this industry and you don’t want to be stuck with too high a proportion of losers by being more selective.

While we all root for this outbreak getting under control sooner rather than later, we should resist being so overwhelmed with pessimism as so many are now, and this is especially important to seek a more balanced view when investing, somewhere in between we won’t ever be OK without a vaccine and this is nothing to really worry about. We don’t want to be overly optimistic either, but there are both reasons to be pessimistic and optimistic out there and we want to take everything into account.

What happens will unravel in time, but along the way, in the face of all this uncertainty, it is very important that we try out best to not lean too far either way if we want to improve our chances of being right, which includes being more right about our investments.

Eric Baker


Eric has a deep understanding of what moves prices and how we can predict them to take advantage. He also understands why so many traders fail and how they may help themselves.

Contact Eric: [email protected]

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