What happened

Developmental-stage COVID-19 vaccine stocks continued their recent downward trend last month. Over the course of October, for instance, Inovio Pharmaceuticals (NASDAQ:INO) lost 16.1% of its value; Novavax's (NASDAQ:NVAX) stock fell by 23%; and Vaxart's (NASDAQ:VXRT) shares retreated by a noteworthy 28.2%, according to data from S&P Global Market Intelligence.

Each of these pre-revenue vaccine companies has now lost over 50% of their value since hitting all-time highs last summer. The SPDR S&P Biotech ETF -- a proxy for the broader biotechnology industry, by contrast, has actually gained close to 20% over this same time period.

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So what

This latest downturn among these second-tier vaccine developers appears to be the result of three key issues:

1. Additional funding for COVID-19 vaccine research has failed to materialize in the second half of 2020 due to the gridlock in Washington, D.C., over another stimulus package. Although Novavax has already landed a significant amount of money from the U.S. government's Operation Warp Speed, Inovio and Vaxart have yet to receive a large award from the federal government for their COVID-19 vaccine candidates -- a fact that may be causing some investors to sour on these speculative vaccine stocks.
2. Despite some hiccups, AstraZeneca, Moderna, Pfizer, and Johnson & Johnson's subsidiary Janssen will likely be first to the market with their respective COVID-19 vaccine candidates. In turn, Novavax, Inovio, and Vaxart may end up with a much smaller market opportunity than originally anticipated, once everything is said and done.
3. Healthcare stocks as a whole performed poorly last month due to the uncertainty created by the U.S. presidential election. Pre-revenue companies like Inovio, Novavax, and Vaxart were hit particularly hard by this risk-avoidance behavior during the month of October.

Now what

Are Inovio, Novavax, and Vaxart worth picking up on this hefty pullback? Although each of these developmental biotech stocks could turn out to be a diamond in the rough, there is a ton of risk on the table with all three of these names right now.

The long and short of it is that there is no way to realistically estimate the market size for the second wave of COVID-19 vaccines, or whether there will even be another tranche of government funding for vaccine research. Thus, it might be best to take a wait-and-see approach with this group of equities for the moment.