Engine No.1 takes stake in GM, vaccine stocks fall on Merck's COVID-19 drug

Yahoo Finance's Brian Sozzi and Julie Hyman breakdown how General Motors, Teva, and Merck are faring in Monday's market.

Video transcript

JULIE HYMAN: This is Yahoo Finance Live checking on some other movers that we are watching today. And got to start with General Motors because Engine No. 1, the activist investment firm, expected to be out with a white paper later this afternoon and an announcement that it is investing in General Motors. Remember, Engine No. 1, the activist from the-- successfully pushed for some change over at Exxon.

And it's interesting here, its thesis, when it comes to General Motors. Basically, it's on board with what General Motors has been doing in terms of its push into electric, but just says basically it needs to do more, and in particular, that it has to transition to battery electric vehicles in a more sort of aggressive and holistic fashion. And got a preview of the white paper, among other things. They say Tesla alone is not enough in terms of pushing the global transition to electric vehicles. Really interesting here, call and next target for this company, Brian.

BRIAN SOZZI: Yeah, really interesting call. I think all eyes were looking at another oil attack here by the folks over at Engine No. 1. I know Chevron had been rumored there. But interesting take here. Overall, the paper gives General Motors really high marks on what they are, in fact, doing. They're supposed to be no longer making regular, old gas guzzling cars by 2035. They will have an all-electric lineup.

Also getting some high marks for their battery technology. That is Altium, the Altium cells that have been highly touted by many folks on the street as well and also, too, giving GM some high marks for a history of pivoting towards market shifts there. It's not that Ford, Volkswagen, and Toyota aren't doing these things right now. It just appears, at least from an Engine No. 1 standpoint, that GM is leading.

JULIE HYMAN: Yeah, and we're going to talk more about General Motors in just a few minutes when we do our takes in the next segment. But want to move on and talk about something else that's still having some ripple effects through the market. And that is Merck's announcement late last week that it had had positive study results in its treatment for COVID-19 that showed it cut hospitalization risk by up to 50%.

The stock surged, I believe, about 8% on Friday. And it is heading in the same direction today, or at least was in early trading. And there it is, it's up another 3%. And of course, we also saw not just Merck go higher, but really, overall, kind of a positive ripple effect from this news and its ability to hopefully stem the tide of coronavirus.

The other part of the ripple effect, of course, Brian, as you noted on Friday and today, is that we are seeing the vaccine makers go lower. Of course, part of that is, I mean, when you look at the likes of a Moderna, for example, it had just a monster third quarter in terms of its stock performance. I believe it was the best performer in the S&P 500. So it and the likes of Novavax and some of the others going lower today is on the back of what has been some pretty stellar outperformance.

BRIAN SOZZI: Yeah, Julie, I was just toiling around some charts on Yahoo Finance Plus. And I have Moderna down close to 30% in the past month. And most of that decline has come after this Merck news. But now you're starting to get the sense, Julie, that the market is starting to price in, in 2022, we're all going to be taking pill forms, a pill COVID booster or whatever it is from Merck and not-- and Moderna is not going to be selling any vaccines.

And I don't think we're at that point now. But you could, at some point this week, start to see some buyers here in Moderna into a company that is very, very innovative, working on many interesting things, and also going to continue to have likely very strong results for the next four, five, eight quarters in a row, if not even longer.

JULIE HYMAN: Yeah. I mean, of course, the big difference, Merck's would be reactive, whereas the vaccines are prophylactic. But, you know, obviously, there are some folks who are not willing to go the one way who may be forced to take a treatment if they do not.

One other drugmaker that I'm watching here this morning is Teva Pharmaceuticals. And that's because the company is doing a big recall. More than 2 and 1/2 million vials of drugs, the company says, may not be sterile. It's interesting that the shares are only down about a tenth of 1%. They were down more in early trading. And these were cancer drugs that were in these various vials.

What this speaks to is not just Teva, but also some of the bigger supply chain issues within the industry. The Biden administration has been pushing for more drug production, of course, to be brought to the United States. This medication that we're talking about in this case was made in the United States, was made in California.

So it just illustrates some of the challenges even on our home turf with making some of these drugs. Frankly, it also raises the question to me, Brian Sozzi, of, you know, if there are these issues here, the stuff that is shipped here from China that's not under direct US oversight, what kind of shape is that stuff in? So it just-- you know, it's a complex supply chain that has to be sort of addressed here.

BRIAN SOZZI: Yeah, and it's just, I think, another example of continued pressure on all sorts of supply chains. I mean, we're still making millions upon millions of doses of COVID-19 vaccines. And I still see stories out there of shortages in vials and other ingredients here. So this continues, and I'm sure it presents a risk to a lot of companies.

JULIE HYMAN: Yes, and again, interesting that Teva is not down more, but we'll keep tracking that.