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Mixed fortunes of pharma, travel and hospitality – one year on from first jab

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Mixed fortunes of pharma, travel and hospitality – one year on from first jab

  • A year ago today the UK became the first country in the world to deploy an approved COVID-19 vaccine.
  • Since then 120 million vaccine doses have been administered across the UK.
  • The share price of BioNTech has soared 136% in a year, Pfizer has risen 21% while AstraZeneca’s share price is up just 2%.
  • FTSE 100 has risen 12% over the year, and the FTSE 250 by 17% as other companies lifted on news of the rollout.
  • The recovery rally has boosted The Restaurant Group by 27% over the past year, but J D Wetherspoon is still 19% lower.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

“Administering the Pfizer BioNTech vaccine exactly one year ago today to NHS patient Margaret Keenan was the extra shot in the arm the economy needed to recover from the worst of the pandemic. The roll out of the vaccine programme has been accompanied by an 11.8% rise in the FTSE 100 and a 17% rise in the FTSE 250, but there have been plenty of setbacks along the way. Fresh lockdowns and new strains have set nerves on edge, but early indications showing the Omicron variant might not be as be as calamitous as first thought is propelling a fresh relief rally. Calming words from the chief medical advisor to the US President, Dr Anthony Fauci, that initial data doesn’t show that there is a great degree of severity to Omicron, has helped soothe markets further. However, there is still likely to be turbulence ahead given that the UK government is thought to be considering trigger a plan B and work from home orders, to stop the rapid spread of the new variant which is considered to be more infectious.

For the pharmaceutical giants at the forefront of the vaccine drive, it’s been far from a smooth ride since the first jab was administered.

AstraZeneca’s share price has barely moved compared to its rivals, up by just 2% over the past year because while its jab has made it a household name worldwide, the group promised not to profit from the vaccine ”during the pandemic”. While that may change in 2022, with the group looking to build moderate profits into new contracts, exactly how profitable it ends up being is unclear.

Pfizer saw revenue from its vaccine branch leap to $36 billion in the third quarter, and with bumper profit rolling in, its share price is up 21% over the year. But since the start of the month, as concerns the vaccine might not be as effective against the new strain have emerged, it’s been losing ground.  It’s now coming under scrutiny over the scale of its profits and the portion of doses it has delivered to low-income countries.

BioNTech, the German bio tech company which launched the first vaccine in partnership with Pfizer, has followed its path lower amid the uncertainty, but shares are still up by 136% in a year. It had been boosted again in November following expectations of higher demand in Europe due to infection surges.  The shine has also come off Moderna since the end of November but a fresh study showing its effectiveness as a booster vaccine could be another game changer in its fortunes, with shares rising 6% yesterday, and over the year shares are still up by 66%. The research by Oxford University showed that a mix and match approach with Moderna as a third shot could help improve immunity.

Vaccine manufacturers’ share prices are likely to remain volatile as scientists race to establish their effectiveness against the Omicron variant and the exact recipe for success to bolster immune responses.

But with the jumpiness of investors now calmed, the interrupted recovery in travel and hospitality is likely to resume in force. Shares in The Restaurant Group are up 27% since the first jab was administered. But shares have fallen back this morning by around 5% amid fresh worries that Omicron could potentially be more infectious, leading to a decline in bookings over the winter. Vaccine roll outs haven’t provided the booster shots that pub chain JD Wetherspoon has needed, with its shares still 19% down compared to a year ago. The group has seen a shift among its core customers, with older, more vulnerable patrons opting to drink at home and that’s kept a lid on sales which has worried investors. But with concerns about omicron easing, investors are have seen this as more of a temporary headwind, albeit one which may continue while high infection rates swirl.

The expected return to some kind of normality has though boosted the share price of First Group, with shares in the train and bus company up 55% over the past year. UK public transport operations are so far unaffected by extra travel restrictions, so with further UK lockdowns looking unlikely, FirstGroup, now wholly focused on the UK, could be seen as a relative safe haven in the wider transport sector.

The other driver of its share price could be the aftereffects of its tender offer to return £500 million to shareholders which was significantly over subscribed and sent shares higher last week. It bought back 39% of its issued capital, which was financed by the sale of its student and transit businesses in the United States. With fewer shares in circulation, it makes the company’s earnings higher on a per-share basis, but with a new slimmed down operation could also now be perceived as having made the company a more attractive prospect for a potential buyer.

We are likely to see the same pattern of two steps forward, one step back for companies still on the path to recovery, as fresh information seeps through daily about infectiousness of the latest strain, the efficacy of vaccines containing serious illness and whether more controls will be put in place to stop its spread.’’

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