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Stock Market Returns and Announcements of COVID-19
Vaccine: An Event Study Analysis of Vaccine Companies
Yichen Luo1,a,*,+, Yiwei Wang2,+, Jiayu Li3, Qing Wang4
1St Chad’s College, Durham University, Durham DH1 3RH, United Kingdom
2Faculty of Science & Engineering, University of Liverpool, Liverpool L69 7ZX, United Kingdom
3Business school, University of Birmingham, Birmingham B15 2SQ, United Kingdom
4College of Arts & Science, New York University, New York 161 6th Avenue, the United States of
America
a. luoyichencn110110@gmail.com
*corresponding author
+These authors contributed equally to this work and should be considered co-first authors.
Abstract. For vaccine companies, the announcements of the beginning and ending of COVID-
19 vaccine development are milestones of vaccine companies. Few studies have explored
how announcements of COVID-19 vaccine affect stock market returns of vaccine companies.
In this work, we match the announcements of the beginning and ending of COVID-19 vaccine
development with three leading vaccine companies and adopt the event study methodology
to examine the relationship between COVID-19 vaccine development events and changes in
stock returns. We identify the 6 public announcements related to 3 beginning and 3 ending as
well as 3 vaccine companies. The majority of the events were associated with stock prices
increases when those events happened. Our study shows that Covid-19 vaccine R&D have
material economic implications and the result shows that investors can use biological company
announcements as a solution for determining when to invest in the company and its
competitors.
Keywords: stock market returns, COVID-19 vaccine, event study methodology
1. Introduction
The announcements of the beginning and ending of COVID-19 vaccine development are milestones
of vaccine companies. The value of these two endpoints is high because they not only increase the
profitability of these biopharmaceutical companies but also provide a prospect to relieve sickness and
suffering.
Many industry commentators have stated that the vaccine companies face a research and
development (R&D) ‘productivity dilemma’ [1]. On the one hand, enormous payback of the COVID-
19 vaccine is foreseeable. On the other hand, since late-stage clinical trials (Phase II and Phase III)
are expensive, any distraction such as a pause of the R&D process and releases from competitors will
have a subtle and profound impact on the vaccine company [2].
Given the risks and returns, the releases of the beginning and ending of COVID-19 clinical trials
are important moments in the whole COVID-19 vaccine development process. Since the stock price
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DOI: 10.54254/2753-7048/3/2022295
© 2023 The Authors. This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0
(https://creativecommons.org/licenses/by/4.0/).
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of a company reflects its current and future earning capability, the announcements of beginning and
ending are expected to have a positive effect on the stock prices.
2. Literature Review
Several industry commentators pointed out that the biopharmaceutical industry faces a Research and
Development productivity crisis since the Phase 3 trials typically cost up to 40% of the total Research
and Development costs [3]. That is why one goal of this study is to investigate the impact of the
endpoint of COVID-19 vaccine development on the stock prices.
To measure the market value effects of our sample of beginning and ending, we used event study
methodology, an approach widely used in financial economics. A number of studies investigate the
impact of vaccine R&D on the company's stock price. In Maximilian Vierlboeck's view, the company
announcing R&D typically gets significant positive abnormal returns, but the effect of R&D
announcements on rival companies is not clear [4]. Abnormal returns of the rival company reacted to
the R&D information of the announcing company may be either positive, negative, or may be no
abnormal returns. Besides, we believe that a vaccine race exists among vaccine companies. Unlike
follow-on competitors, the first company to research a new product or process reaps disproportionate
profits. Therefore, every company is eager to complete the development of new products or new
processes in the first place relative to its competitors [5]. To contribute to this scarce field, we not
only study the impact of announcements of beginning and ending on the company that released the
announcement but also determine whether the announcement significantly affected the stock returns
of other competitor companies.
3. Methodology
3.1. Sample Selection
Our sample of firms was formed from three premier biopharmaceutical and biotechnology companies
(Pfizer, AstraZeneca, and Johnson & Johnson) that actively developed their own COVID-19 vaccine
from 2020 to 2021. For our events, we focused on two types. The first type of event is public
announcements that companies determined to develop potential vaccines. The second type is papers
issued regarding results from Phase 3 trials. We searched the official website of Pfizer, AstraZeneca,
and Johnson & Johnson for those events. The keywords for the search were: ‘co-develop,’ ‘covid-19
vaccine,’ ‘clinical trials,’ ‘Phase 3,’ and ‘Journal.’ Description of all events we studied are provided
in Table 1.
Table 1: Events of COVID-19 Vaccine Selected in the Study.
Firm
Date
Event
Pfizer
03/17/2020
Pfizer and BioNTech announce to co-develop potential COVID-19
Vaccine
Johnson &
Johnson
04/23/2020
Johnson & Johnson announces collaboration to expand
manufacturing capacity for its COVID19 Vaccine candidate
AstraZeneca
04/30/2020
AstraZeneca and Oxford University announce landmark agreement
for COVID-19 Vaccine
AstraZeneca
12/08/2020
AZD01222 Oxford Phase 3 Trials interim analysis results published
in The Lancet
Pfizer
12/10/2020
Pfizer and BioNTech announce publication of results from
Landmark Phase 3 Trial of COVID-19 Vaccine candidate in the
New England Journal of Medicine
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Table 1: (continued).
Johnson &
Johnson
04/21/202
1
Johnson & Johnson publish results from Landmark Phase 3 Trial of
COVID-19 Vaccine candidate in the New England Journal of
Medicine
Notes: Sample announcements were manually matched with unique clinical trials. Every single piece of event information came from
company official websites.
3.2. Data Collection and Event Study Methodology
We are able to study how specific events change the company's prospects by quantifying the impact
of events on company stocks. In this study, it was examined whether the major biotechnology
companies that work with COVID-19 vaccines during the pandemic period have different returns
than the period when they are not involved in developing vaccines. This paper used the event study
to determine abnormal returns (ARs) and cumulative abnormal returns (CARs) and then identified
the effects of the vaccines.
First, we defined the 6 different event windows as 7 trading days before and after event dates listed
in the above table, and the estimation window as 300 trading days (from 12/26/2018 to 03/05/2020),
before the date when the first announcement regarding cooperative R&D claimed by Pfizer.
To estimate ARs during the event windows, we need to build the expected model. The market
model, chosen for the study, builds on the actual return on the reference market and the correlation
between the company’s stock and the reference market. In the market model,
+ (1)
where is the actual daily return for firm on day and is the stock market index return
on day , here S&P 500 stock index is used as the market portfolio. and , two market model
parameters, were estimated by OLS using stock price data during the estimation period from the
website, Investing. is the one-day risk-adjusted residual for firm . We also defined the expected
stock return for company on day :
(2)
Next, we calculated the within the event window as follows:
(3)
Finally, each firm’s cumulative abnormal returns (for each time interval within the event
window was computed by:
(4)
In our study, if each event date were defined as day 0, firm-level would be calculated for the
(-7, -7+n) windows separately, where
3.3. Statistical Analysis
The answer about statistical significance is given by means of hypothesis testing, where the null
hypothesis () states that the mean of cumulative abnormal returns within the event window equals
to zero and the alternative hypothesis () states the opposite.
Here we used a two-sided T test, with significant levels . In order to obtain t
statistics, we standardized using the standard error of residuals () to obtain t statistics:
(5)
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where ,
4. Empirical Results
Our sample includes 6 public announcements related to 3 beginnings and 3 endings as well as 3
vaccine companies. These vaccine companies are Pfizer, AstraZeneca, and Johnson & Johnson.
4.1. Stock Returns Analysis
The majority of events were associated with stock prices increases when those events happened (T =
0). In the majority of cases, the signs of the cumulative abnormal return (CAR) ±7 days were positive.
For Pfizer's beginning of development, the CARs of Pfizer for 10/13 days and Johnson & Johnson
for 7/13 days were positive, while the CARs of AstraZeneca for 11/13 days were negative (Figure 1).
The CARs of Pfizer and Johnson & Johnson were significantly positive one day after the event
happened, whereas the CAR of AstraZeneca was significantly negative.
Figure 1: Cumulative abnormal return of Pfizer's announcement of COVID-19 vaccine development.
Figure 2: Cumulative abnormal return of Pfizer's publishment of results from phase III clinical trial.
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For Pfizer's ending of development, the CARs of Pfizer for 9/13 days, Johnson & Johnson for
13/13 days, and AstraZeneca for 7/13 were positive (Figure 2). The CARs of Pfizer were significantly
positive at day -6 and day -2, whereas the CARs of Johnson & Johnson and AstraZeneca were
moderate.
Figure 3: Cumulative abnormal return of AstraZeneca's announcement of COVID-19 vaccine
development.
For AstraZeneca's beginning of development, the CARs of AstraZeneca for 7/13 days and Pfizer
for 13/13 days were positive, while the CARs of Johnson & Johnson for 11/13 days were negative
(Figure 3). All CARs were moderate.
For AstraZeneca's ending of development, the CARs of AstraZeneca for 9/13 days, Pfizer for
13/13 days, and Johnson & Johnson for 13/13 were positive (Figure 4). The CARs of Pfizer were
significantly positive from day -6 to day 3 (10/14), whereas the CARs of Johnson & Johnson and
AstraZeneca were moderate.
Figure 4: Cumulative abnormal return of AstraZeneca's publishment of results from phase III clinical
trial.
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Figure 5: Cumulative abnormal return of Johnson & Johnson's announcement of COVID-19 vaccine
development.
For Johnson & Johnson's beginning of development, all CARs of Johnson & Johnson and
AstraZeneca were positive, while the CARs of Pfizer for 11/13 days were positive (Figure 5). The
CARs of Johnson & Johnson at day -6, -5, and 0 were significantly positive, while the CARs of Pfizer
and AstraZeneca were moderate.
Figure 6: Cumulative abnormal return of Johnson & Johnson's publishment of results from phase III
clinical trial.
For Johnson & Johnson's ending of development, the CARs of Johnson & Johnson for 9/13 days,
Pfizer for 13/13 days, and AstraZeneca 12/13 were positive (Figure 6). The CARs of AstraZeneca
were significantly positive when the event happened, whereas the CARs of Johnson & Johnson and
Pfizer were moderate.
5. Conclusion
In this essay, we evaluated the impact of coronavirus vaccine R&D on the share price fluctuations of
three of the biggest biopharmaceutical companies. This paper used empirical study methodology to
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connect daily share price with the results from clinical trials. Empirical results showed that public
announcements of the development of potential vaccines exert more influence on the stock market
than the release of Phase 3 test results. According to the results of our research data (Figure 1-6),
there were 5 of the 18 events in the vaccine clinical trial process having significant effects on stock
return of the company, with only one (ps: In Form 2 and Form 4, Pfizer’s time coincides, so we
believe that the AstraZeneca's research result for Pfizer has none research value) corresponding to
Phase 3 clinical trial and four related to the announcement of the beginning of the research. We
believe this is because that the insider trading will cause the stock price to react in advance relative
to the event, thereby reducing the stock price volatility within the event window. Insider trading in
Phase III trials is simpler than when companies announced the beginning of a vaccine development,
due to the fact that Phase III trials are open to the public. In fact, before vaccine trial results are
released, many people who participate in the phase 3 trial process are likely to have information
regarding the result [6].
In addition, our findings also suggested that the announcements of the start of the vaccine
development typically led to increases in stock prices of the firms that made those announcements,
which was consistent with our hypothesis. Besides, we found support for the contagion or competitor
effect. As the first pharmaceutical company among the three companies to announce the development
of a vaccine, Pfizer's stock price has increased significantly and had a positive contagion effect on
Johnson & Johnson. On the contrary, AstraZeneca as a competitor has received significant negative
abnormal returns. We believe that the opposite effect is due to AstraZeneca’s indifferent attitude
towards vaccine development in the early stages of the epidemic. (Before March 17,2020, there was
no related entry about AstraZeneca vaccine in google search). By contrast, Johnson & Johnson
showed a strong interest in developing vaccines at the beginning of the outbreak [7]. Pfizer has
increased the confidence of vaccine investors and has produced positive spillover benefits for other
companies expressing the hope to develop vaccines, while AstraZeneca was perceived by investors
to be unable to capture future profits from covid-19 vaccine market. These findings support the
efficient market hypothesis proposed by Burton G. Malkiel in 2003 [8]. He believes that the stock
market is remarkably efficient and investors react rapidly to the new information.
Overall, our study shows that Covid-19 vaccine R&D have material economic implications and
the result shows that investors can use biological company announcements as a solution for
determining when to invest in the company and its competitors
Acknowledgment
Yichen Luo and Yiwei Wang contributed equally to this work and should be considered co-first
authors.
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