Flu was again worse than covid this winter. Is that pattern here to stay?

Market structure: A winter where influenza overtakes COVID shifts revenue from pandemic-era COVID specialists toward traditional vaccine makers, diagnostics and retail pharmacies. Direct winners: diagnostics/rapid-test makers (Abbott ABT, Quidel QDEL), pharmacies (CVS, WBA) and legacy flu vaccine producers (Sanofi SNY, GSK GSK); losers: pure-play mRNA COVID vaccine dependency (Moderna MRNA) and COVID therapeutics if demand falls. Expect pricing power to favor high-margin diagnostics and OTC sales while COVID booster pricing and volumes compress across 2026 vs. 2021–23 peaks.

Risk assessment: Tail risks include a novel COVID variant restoring demand (low-probability, high-impact in 3–6 months) or CDC shifting vaccine guidance that reallocates funding; regulatory action on test reimbursement could knock 20–40% off diagnostics revenue quickly. Near-term (weeks) effects are visible in hospital admissions and retail OTC sales; medium-term (1–3 quarters) affects Q2–Q3 earnings; long-term (1–3 years) could restructure vaccine market share. Hidden dependencies: hospital staffing constraints and insurance reimbursement lag could mute revenue flow despite higher admissions.

Trade implications: Implement concentrated longs in diagnostics and retail health: ABT and QDEL as core longs for 3–9 months, paired with tactical short exposure to MRNA and select COVID-focused biotech. Options: buy 3–6 month call spreads on ABT/QDEL and 3-month put spreads on MRNA to cap cost. Rotate overweight into healthcare services (HCA) if hospitalization trends persist for two consecutive weeks; trim travel/leisure cyclicals (airlines) if respiratory season remains elevated.

Contrarian angles: Consensus may underprice the magnitude of steady-state flu demand and overprice permanent decline of COVID revenue streams; MRNA’s valuation assumes recurring high booster uptake—if uptake falls 40% vs. 2023, downside >30%. Historical parallels: post-2010 seasonal influenza normalization reduced emergency-use product premiums rapidly. Unintended consequence: lower COVID cases could temporarily boost elective procedures and hospital margins, benefiting providers even as vaccine revenues fall.