Omicron is upping booster jab demand. So why are COVID vaccine makers’ shares tanking?

The surging Omicron variant has helped underline the need for booster shots, including perhaps even a fourth jab, as Israel is currently trialing. So why are the stocks of leading COVID-19 vaccine makers tanking?

Shares of Moderna have fallen almost 35% in the past month. BioNTech, whose mRNA technology is behind the Pfizer vaccine, has also seen shares dip by more than a third in the same period. Vaccitech, the biotechnology company behind the COVID-19 vaccine made by AstraZeneca, has watched its shares fall more than 17% in the year’s last month. Meanwhile, Novavax, whose COVID-19 vaccine has now been approved for use in Europe and many other parts of the world, has seen its stock fall by almost 20% in December, and Valneva, which is working on a vaccine that might be able to protect against multiple coronavirus variants, has seen its shares drop 13%.

Analysts say the slump may simply reflect year-end profit-taking. Both Moderna’s and BioNTech’s shares have lost half their value since hitting 2021 highs in August and yet are both still up more than 100% for the year. (BioNTech’s U.S. depositary receipts are up are 183%, in fact.) For instance, last month BMO Capital analyst George Farmer wrote to clients that he thought any upside to Moderna’s shares were already priced in and that investors would be wise to take profits. Shareholders were also disappointed in early November when the company cut its sales forecast for its COVID-19 vaccine and missed both earnings and revenue forecasts for the third quarter of 2021. The majority of equity research firms now have “hold” ratings on shares of BioNTech and Moderna.

Minnows in a sea of sharks

But some speculate that the fall also reflects concerns over whether these small biotech companies will be able to continue to capitalize on their COVID-19 vaccine technology. The shares of the more diversified large pharmaceutical companies that have partnered with some of these smaller biotech companies to manufacture and distribute the COVID-19 vaccines have not slumped. Pfizer, BioNTech’s partner on the COVID-19 vaccine, for instance, has seen its shares climb 10% in December. Shares of AstraZeneca, Vaccitech’s vaccine partner, are up 3.7% in December. The stock price of Johnson & Johnson, whose Janssen division makes the COVID-19 vaccine widely used in the U.S., is up over 6% for the month.

Another factor at play is whether the current Omicron surge is actually a sign that the pandemic may be winding down.

Early research seems to indicate that Omicron is more transmissible but less severe than earlier coronavirus strains, and there is also some indication that Omicron infection confers immunity against other, more dangerous coronavirus variants. This may mean that SARS-CoV-2, the virus that causes COVID-19, will become less of a threat to public health systems in the future, and that frequent boosters may be less necessary for most of the population.

Such a development would undercut bullish assumptions about future sales of the COVID-19 vaccines currently baked into the share prices of the small biotech stocks. And with fewer, if any, other revenue-generating products currently on the market, these companies are much more vulnerable to that scenario than their large pharmaceutical partners.

Crowded vaccine market

Another problem is the mounting number of alternative vaccines and new COVID-19 treatments on the market. While the Moderna and Pfizer/BioNTech vaccines were the first approved for use in the U.S., and while the U.S. Food and Drug Administration has thus far approved only one additional vaccine, the J&J jab, the World Health Organization has approved 10 vaccines for use globally. In addition, both Merck and Pfizer have now received approval for medicines that can treat people once they’ve become infected, preventing them from developing the most dangerous COVID-19 symptoms. This, to some degree, may lessen the need for ongoing boosters and vaccination of entire populations.

There are also doubts about the extent to which the smaller biotech companies will be able to capitalize on the innovative technologies they have pioneered. BioNTech and Moderna were both founded on the idea that messenger RNA (mRNA) could be a useful delivery mechanism for a range of drugs, particularly cancer immunotherapies. But for a number of years, many researchers and most of the big pharmaceutical companies were skeptical. The success of the COVID-19 vaccines silenced these doubters, but now a host of competitors, including those pharma giants, are jumping on the mRNA bandwagon.

For instance, Albert Bourla, Pfizer’s chief executive, caused the shares of Moderna and other biotechs working on mRNA to wobble back in March 2021 when, in an interview with the Wall Street Journal, he casually mentioned that the pharmaceutical firm has “our own expertise developed” in the technology. The company has since launched trials of both an influenza vaccine and an immunotherapy for colorectal cancer based on mRNA technology. (Both of those trials are in partnership with BioNTech, so it should be good news for that company’s shareholders at least.)

This story was originally featured on Fortune.com