Omicron Variant Has Covid-19 Vaccine Makers Preparing for Worst Case - The Wall Street Journal

The possibility of more demand for Covid-19 shots is helping lift drugmakers' stock prices.

Photo: Frank Rumpenhorst/Associated Press

Drugmakers raised the prospect that existing Covid-19 vaccines might be less effective against the new Omicron variant of the coronavirus, which could create a need for modified vaccines that better target the concerning new strain.

The prospect of new demand for booster shots, as well as medicines to treat disease caused by the new strain, have lifted the stock prices of several drug companies in recent days, including Pfizer Inc. and Moderna Inc. Though the knowledge of Omicron is limited at this point, investors are already...

Drugmakers raised the prospect that existing Covid-19 vaccines might be less effective against the new Omicron variant of the coronavirus, which could create a need for modified vaccines that better target the concerning new strain.

The prospect of new demand for booster shots, as well as medicines to treat disease caused by the new strain, have lifted the stock prices of several drug companies in recent days, including Pfizer Inc. and Moderna Inc. Though the knowledge of Omicron is limited at this point, investors are already making bets that its emergence will become a significant source of sales for drugmakers.

"The more subtle impact of Omicron is to shift investors' probabilities away from expecting the virus will disappear and more toward anticipating virus presence as the new normal," Bernstein analyst Ronny Gal wrote in a research note. "This will help the vaccine/therapies manufacturers."

President Biden said Monday that his administration was working with officials at Pfizer, Moderna and Johnson & Johnson to develop contingency plans for vaccines or boosters in case they are needed to combat the Omicron variant. Photo: Oliver Contreras/Bloomberg The Wall Street Journal Interactive Edition

Moderna shares were up 10% at $361.90 in midday trading Monday, after a 21% rise in the stock on Friday. The company said it is testing whether its Covid-19 vaccine is effective against the Omicron variant, while also developing a modified vaccine that specifically targets the variant.

Shares of Pfizer, which co-developed a Covid-19 vaccine with BioNTech SE, were flat in midday trading on Monday after a 6.1% gain Friday.

The Omicron variant of the coronavirus was identified in South Africa last week, and has been found in several other countries. It has a high number of mutations compared with other variants, which could be a sign it is better able to elude vaccines. Global health authorities say it might increase the risk of reinfection compared with other variants.

It is unknown how Omicron compares to Delta and other variants. Health authorities are still trying to determine whether Omicron has a higher transmission rate than other variants, and whether it causes more severe disease than other variants.

French patients waited to receive a Covid-19 vaccine Saturday. Lab tests will determine whether existing vaccines sufficiently neutralize the new strain.

Photo: jeff pachoud/Agence France-Presse/Getty Images

Vaccine makers have begun lab tests to determine whether their existing vaccines provide a sufficient neutralizing effect against the new variant.

Before knowing those answers for certain, some drugmakers say it is possible their existing vaccines won't be sufficient to protect against the new variant. The Omicron strain contains several mutations that have been associated with reduced effectiveness.

"I think the results could be, which we don't know yet, that the vaccines protect less," Pfizer Chief Executive Albert Bourla told CNBC on Monday. If that is the case, the company can create a new vaccine in less than 100 days, and has already begun work, he said.

Moderna Chief Medical Officer Paul Burton said in an interview with the BBC on Sunday the Omicron strain could escape protection conferred by vaccines. He added that the mutations in the new strain are associated with "immune escape. You bring those together, I think this is a very concerning virus."

Moderna said it is testing whether its Covid-19 vaccine is effective against the Omicron variant, while also developing a modified vaccine targeting the variant.

Photo: Manu Fernandez/Associated Press

Pfizer and Moderna are testing whether their existing Covid-19 vaccines provide protection against the new variant. At the same time, they could have Omicron-targeted vaccines ready within a few months, in case the original vaccines aren't sufficient.

The companies previously worked to quickly design modified vaccines against other variants, but thus far have stuck with their original vaccines for booster shots. That could change with Omicron.

"A modified booster is more likely than not to be necessary," Morgan Stanley analyst Matthew Harrison wrote in a research note Monday. He estimated the market for Omicron booster shots could be between $20 billion and $50 billion in 2022.

Johnson & Johnson also is evaluating the effectiveness of its Covid-19 vaccine against the new strain, and will begin work on an Omicron-specific vaccine in case it is needed, the company said Monday.

Demand also could increase for some potential Covid-19 treatments.

Adagio Therapeutics Inc. said Monday it expects its experimental Covid-19 drug to retain its neutralizing activity against the Omicron variant, though it hasn't completed testing. The company expects to seek regulatory authorization of its drug in mid-2022.

Shares of Adagio were up 67% at $42 at midday Monday, after a 34% increase on Friday.

Pfizer also expects its experimental Covid-19 antiviral will maintain effectiveness against Omicron. The company has increased its antiviral manufacturing target for next year to 80 million courses of treatment, from 50 million, Mr. Bourla said on CNBC. The company has asked U.S. health regulators to authorize its use.

Write to Peter Loftus at peter.loftus@wsj.com