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In the U.S., demand for boosters is weak with many Americans delaying or skipping the shots entirely.Justin Tang/The Canadian Press

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This year was supposed to be a good one for vaccine makers as strong demand for boosters and new COVID-19-protecting products such as pills and nasal sprays were expected to build on their pandemic success.

But instead of moving to new highs, shares of the leading vaccine manufacturers have sagged. They’ve been caught in the general decline but have sold off far more than broad stock market indexes. Investors see less upside for boosters and related products as evidence mounts that people are less afraid of COVID-19 and see it more as something that can be managed.

In the U.S., demand for boosters is weak, with many Americans delaying or skipping the shots entirely. Analysts predict the number of U.S. COVID-19 boosters given annually will be well below that of annual flu vaccinations. Denmark and Australia are now recommending boosters for only those who are immune compromised because of high levels of national immunization.

“The pandemic is more of an endemic now,” says Alfred Lee, portfolio manager and investment strategist with BMO Global Asset Management in Toronto. “In developed countries, people have their vaccines and boosters if they want them. Those who didn’t get them probably won’t.”

While the trends may give investors pause, analysts say there are plenty of pluses going for vaccine makers. There will also be consistent if lower demand for vaccines. They learned a lot from their response to the virus and can apply that elsewhere. For example, Pfizer Inc. PFE-N is working on a nasal spray, which is not yet approved, and also markets the Paxlovid pill.

Aging developed world populations and more affluent emerging market consumers are leading to a broader uptake of vaccines. Yet, when it comes to the share price, analysts caution that comparing peak prices during the lockdowns with a reopened world is misleading.

AstraZeneca PLC AZN-Q has performed best this year with its shares up 18 per cent. Pfizer’s stock is down 11 per cent, while Pfizer’s partner BioNtech SE BNTX-Q is off 28 per cent. Moderna Inc. MRNA-Q is down 25 per cent and Novavax Inc. NVAX-Q, the fourth vaccine authorized for use in the U.S., is down 88 per cent.

Mr. Lee notes Pfizer and AstraZeneca have broad product lines and pay dividends, which indicates financial strength and can add their vaccine business as another arrow in the quiver. The vaccines are much more central to Moderna and BioNtech and so they have sold off more sharply as conditions have changed. Moderna and Pfizer are in BMO Equal Weight U.S. Health Care Index ETF ZHU-T.

“A lot of [Moderna and BioNtech’s] eggs are in that COVID-19 basket so to speak,” Mr. Lee says. “Pfizer has therapeutics, and pharmaceuticals that are unrelated to COVID-19 and AstraZeneca also has a very diversified pipeline.”

Novavax chief commercial officer John Trizzino said in a recent interview that vaccine fatigue and a belief the pandemic is over is pushing vaccine demand down. Even so, he expects the COVID-19 market will eventually be at least as big as the one fo the flu shot, with increased infection rates, hospitalizations and deaths driving people to get boosters. That makes it a sizeable business.

Mark Noble, executive vice president of exchange-traded fund (ETF) strategy at Horizons ETFs Management (Canada) Inc. in Toronto, says the effectiveness of the vaccines has changed perceptions about COVID-19′s danger. That’s affecting booster shot uptake, which in turn is partly behind the sagging share prices.

“If, for the most part, the majority of people are suffering mild flu-like symptoms after one or two shots, how many more boosters are people going to get?” he says.

Mr. Noble believes nasal sprays and pills hold promise but may not see a huge uptake if people are less anxious. Mr. Lee adds that the spray will be handy for travel if it’s proven to be effective. He says Paxlovid has shown cases where symptoms have relapsed, so uptake has not been strong so far.

Horizons launched Horizons Global Vaccines and Infectious Diseases Index ETF HVAX-T last year to capture the development of COVID-19 treatments and vaccine development more broadly. It holds all five approved vaccine makers. It hasn’t done well in attracting investors and Mr. Noble admits it was late to launch and has suffered from COVID-19 fatigue as well as broader market trends.

He believes the mandate still resonates with some of the holdings exploring vaccines for diseases such as streptococcal bacteria, pneumonia, cancer and tuberculosis.

“There are going to be other breakthroughs that build on the massive amount of [research and development] done with COVID-19,” he says.

He likens the response to the pandemic by drugmakers to the huge effort in the Second World War to develop new technologies with post-war spin-offs that led to the creation of new products and services.

Mr. Lee adds the sector has a lot of positives such as the aging demographic and rising wealth of the emerging market.

“On top of that, valuations in the health care sector are cheaper than where they trade historically,” he says.

Adam Mayers is a contributing editor to the Internet Wealth Builder investment newsletter.

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