Pfizer and Pharma

FDA allows modification of vaccines without clinical studies. But what does it mean for someone looking to buy, or sell, PFE stock?

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What happened?

In a little-publicized meeting on June 28, the FDA authorized covid vaccine manufacturers to include the latest omicron variant in their vaccines. Because the new variants are so recent, there isn't enough time to conduct clinical trials, so the general procedure was waived. This caused some consternation on the internet since the new Pfizer-BioNTech and Moderna vaccines would effectively become bivalent.

The policy change is because the latest omicron variants, BA4 and BA5 have taken precedence, and the vaccine for the original variant isn't as effective against the new strains. This is not an unusual step for the FDA, however; changes in the makeup of the seasonal flu virus depending on the conditions on the ground happen regularly. Most of the variants of flu vaccines have already undergone clinical trials though. The FDA recommended initiating clinical trials on the latest variants.

What does it mean for the stock?

Vaccine manufacturers are having trouble keeping up with the rapidly changing variants. One of the chief selling points of mRNA vaccines over traditional vaccines is that they are supposed to be faster to develop. However, new covid strains become dominant in a matter of weeks, which is much faster than manufacturers shift to new production and distribute vaccines. And this shift in production comes with additional costs, as it requires resetting the manufacturing process.

To make matters worse, Congress has not authorized another tranche of spending to buy the next wave of vaccines that will be needed through the winter. The Biden Administration is only now starting to negotiate the supply of vaccines, with funds shifted from other parts of the covid response. With Congress distracted by the upcoming midterms, the White House has warned that it might not be able to buy vaccines to cover the whole population. Pending resolution of that uncertainty, mRNA manufacturers could see their stock under pressure. In the last quarterly report, Pfizer predicted $32B in sales of its vaccine this year. As for Moderna, $5.9B of its $6.1B in sales last quarter were from the vaccine.

Pfizer prices in triangle formation?

Pfizer stock prices have traded in a symmetrically triangular consolidation since the 2022 low of $45 per share. Despite officially entering a bear market this year, the last upward rally off the $46 low send prices above the -20% bear-market threshold – i.e., back to non-bear territories.

A rejection at the descending trendline of the triangle could reverse the stock to the opposite and then surge higher, breaking past the triangle and heading for its flagpole at $62. In the interim, $55, $56 and $57.50 are resistances. Inversely, losing the bottom of $46 would expose last November’s gap at $43 and the October swing low of $41. But $50 is major support.

Short-term, the gap below $50 has not been filled, but with prices above the 50 and 200-day averages, it could do on the way down. Interestingly, the recent rejection there formed a bullish hammer candlestick pattern.

Source: Spreadex trading platform

Key takeaways

The FDA authorized the manufacturers of covid vaccines to include the latest omicron variant in their vaccines because there wasn't enough time to conduct clinical trials but recommended initial trials on the latest variants.

Vaccine manufacturers have been having difficulty developing new vaccines quickly because covid strains are evolving too quickly. The Biden administration is currently negotiating a vaccine supply with the expectation that Congress will approve more funds for the next wave of vaccines, but if not, then mRNA manufacturers may see their stock under pressure.