A few weeks ago, leading Covid-19 vaccine manufacturers dampened expectations for sales of this year's updated boosters and announced significant spending cuts in their vaccine operations. However, the recent rise in Covid hospitalizations in the U.S. has investors questioning whether those revised outlooks were too pessimistic.

While it is still too early to determine the impact on sales, the upcoming launch of Pfizer (PFE), Moderna (MRNA), and Novavax (NVAX) boosters in the coming weeks has generated anticipation. Investors have already started to react, with Moderna stock experiencing an 18% increase since August 15th after a 46% decline earlier this year. Similarly, shares of Pfizer's partner BioNTech (BNTX) have risen by 14% in the past week, and Novavax stock has seen a 19% increase. Pfizer shares have also climbed by 3.7%.

On Tuesday, Moderna and BioNTech stocks went up by 4.7% and 5.4% respectively, while Novavax jumped by 14%. However, Pfizer's stock slightly decreased by 0.5%.

Despite these market movements, Wall Street experts remain skeptical and uncertain about the potential increase in vaccination rates.

Jared Holz, a healthcare equity strategist at Mizuho, expressed doubts about the stock moves, stating in an email to institutional investors on Monday night that expecting a boost in vaccine use throughout the remainder of the year seems overly hopeful for major vaccine companies. He suggests that the recent gains in Moderna and BioNTech stocks may be short-term trades driven by weakness observed earlier this year.

Colin Bristow, an analyst at UBS, shares a similar perspective. He noted in a recent report that the rise in hospitalizations has had little impact on his generally bearish view of Pfizer's Covid vaccine and antiviral treatments.

The renewed focus on the virus is a response to the recent increase in Covid hospitalizations in the U.S.

Latest Covid Hospitalizations and Vaccine Updates

The Centers for Disease Control and Prevention (CDC) reported on Monday that there were 12,600 people hospitalized with Covid in the week ending on August 12. While this number is lower than previous points before spring, it is still 21.6% higher than the previous week. Notably, Montana and Rhode Island were the only states to see a decrease in hospitalizations over the past week.

The increase in hospitalizations comes as Covid vaccine companies prepare to launch updated vaccines pending approval from the Food and Drug Administration (FDA) and the CDC.

Good News for Vaccines

The current variant makeup in the U.S. appears to align well with the vaccines, which may encourage more Americans to get vaccinated. Most cases are now being caused by a variant called EG.5. While the vaccines were initially designed to target a variant called XBB.1.15, which has been fading, both Moderna and Pfizer have confirmed that their boosters work effectively against EG.5.

A New Concerning Variant

However, a new variant called BA.2.86 has caught the attention of the World Health Organization (WHO) due to its significant genetic differences from Omicron. Dr. Scott Gottlieb, a former FDA commissioner and current Pfizer board member, highlighted the highly-mutated nature of this variant during an interview on CBS News's "Face the Nation."

Implications for Investors

Considering the potential impact of BA.2.86 aside, investors are now focused on whether the current surge in cases could significantly affect demand for the vaccine. The CDC has yet to issue recommendations regarding who should receive the vaccine, and the timing of their announcement remains unknown.

According to Oppenheimer analyst Hartaj Singh, Moderna could benefit the most if Covid poses a greater threat than expected. Singh outlined several reasons for this potential advantage, including Moderna's better preparedness for the commercial market compared to a year ago, robust clinical data (as opposed to mouse data for mRNA competitors), a superior mRNA vaccine, and a better mRNA transportation/storage profile.

In conclusion, the latest updates on Covid hospitalizations and vaccine developments highlight both positive and concerning aspects. While the increase in cases raises questions about vaccine demand, the vaccines currently in use are proving effective against the predominant variant. The emergence of a new highly mutated variant called BA.2.86 adds an additional layer of concern, and its implications are yet to be fully understood. Investors are closely monitoring these developments, with Moderna potentially positioned to benefit if the threat of Covid escalates.

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