Nothing beats being in the right place at the right time. This year that has proved true in spades. If you were fortunate enough in January to own shares in Novacyt, a tiny company with a test that could detect Covid-19, and you resisted the temptation to sell, you were sitting on a gain of 7,000 per cent by early November: £1,000 became £70,000. This happened because Novacyt itself was in the right place at the right time. Its test launched across Europe in February and on 23rd March—the day the UK locked down—it gained emergency approval to sellin the US.
Shares in other small UK biotech companies with Covid-related products have also soared. Synairgen is trialling an inhaled version of a drug that appears to dramatically cut the odds of death from coronavirus. Its shares jumped around 400 per cent on the day it announced positive early results.
Markets, however, can turn on a sixpence. On 9th November Pfizer and its German partner BioNTech said their vaccine had proved around 90 per cent effective in late-stage trials. Immediately, numerous price trends established during the pandemic went into reverse. A week later, US biotech company Moderna published even better results from its vaccine trial.
This was not simply shares in Covid-ravaged travel and hospitality companies bouncing back as investors spied light at the end of the tunnel. Novacyt dropped by a third on 9th November, presumably because demand for tests will fall as vaccines roll out. Synairgen lost almost 40 per cent. These moves make sense. Shares in small diagnostics companies rocketed because, in the heat of the pandemic, governments acquire huge numbers of tests at almost any price. But demand was not likely to last forever and—thanks to the feats of vaccine makers—an end is coming into view. This is great for society, less so for investors watching stellar gains slip away.
Will successful vaccines generate similar huge returns? Not immediately. Pressure to hold down vaccine prices and ensure wide access will be intense. Investors know this, though they also know vaccines are likely to turn into a long-term source of income for their makers. This explains the difference in the share price reactions between test and vaccine manufacturers—the former offering fireworks, the latter a long, slow burn.
