Think twice before speculating on a COVID-19 cure

Reports of successful or failed trials wildly affect stock prices and can trigger swings in the market.

As hundreds of companies around the world race to develop vaccines and drug therapies that could help end the COVID-19 pandemic, reports of successful or failed trials wildly affect individual stock prices and can trigger swings in the overall market. These stories have a knack for stirring up investors’ emotions as we all hope to move past this pandemic and return to a new “normal.”

A vaccine prepares the body’s immune system to be able to resist a specific disease and prevent it from causing sickness and spreading to others. At this point in time, there are more than 125 experimental candidates globally in the clinical evaluation stage, and another 115 candidates are in the pre-clinical stage. Clinical studies are conducted in three phases:

Phase I: A small study of healthy people tests the safety and immune response of the vaccine at different doses.

Phase II: A random, double-blind controlled study of hundreds of people further assesses safety, efficacy and optimal dosing.

Phase III: If all goes well, then thousands of people are tested in Phase III.  These larger studies are challenging as they test how well the vaccine works in an environment where the virus is spreading.

In developing a vaccine, not one of these crucial steps can be skipped, and typically a vaccine takes up to 12 to 18 months before becoming available. In this case, the government is accelerating the timeline to speed up the phases, and massive public investment has allowed drug makers to get a head start on manufacturing doses while waiting for human trials to conclude. 

Is hope on the horizon?

Needless to say, a COVID-19 vaccine is not imminent, but unprecedented levels of dollars are being spent in an effort to develop successful treatments and therapies to help COVID-19 patients. New biotechnologies, financial support and cooperation between governments and industry leaders could shave several years off typical developmental timelines.

It is rarely easy to predict which new products will perform well enough in multiple rounds of studies to earn regulatory approval. Headline-induced price swings suggest that investors are making decisions driven by hopes and fears, and possibly based on limited information, instead of a realistic assessment of long-term earnings potential. 

Investors need to be wary of banking on a particular company to emerge as the winner in the COVID-19 race just because they are the apparent leader right now. It’s impossible to know which, if any, of the experimental vaccines will be successful. Also, it’s possible that there are multiple drug makers that win regulatory approval for the vaccine.

Now more than ever, it is important to maintain an investment strategy based on your own goals, time horizon and risk tolerance.  All investing involves risk and there are no guarantees that any investment strategy, especially which biotech or pharmaceutical stock wins the COVID-19 vaccine race, will be successful.


This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.  Forward-looking statements are subject to certain risks and uncertainties.  Actual results, performance, or achievements may differ materially from those expressed or implied.  Information is based on data gathered from what we believe are reliable sources.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC.  This is for general information only and is not intended to provide specific investment advice or recommendations for any individual.  It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. 

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management.

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