There are a few dozen companies involved in a dizzying array of clinical trials for a coronavirus vaccine. Whoevever wins this vaccine race is likely to generate large profits for their shareholders. It's not quite easy to follow all these pharmaceuticals companies as they have different areas of focus and a varied track record in terms of past performance. So, this post is an attempt to breakdown the crazy race of vaccines.
Before we dive into the companies, it is important to understand the steps involved in producing vaccinations. Here are the high level steps:
Create a formula
Test the formula through clinical trials (multiple phases)
Get an approval from a regulatory body
Produce / Manufacture the vaccinations
Distribute the vaccines
Monitor the administration of vaccines and feedback any issues / side effects
A pharmaceutical company need not be involved in all the steps mentioned above. This means when a vaccine is successful, multiple companies in the chain can potentially benefit from the success.
Of the many different contenders in this vaccine race, the following stocks / partnerships are of particular interest as they are at least a few months ahead of the remaining contenders:
Oxford University / AstraZeneca
Moderna
Pfizer / BioNTech
Novavax
AstraZeneca (AZN)
AZN is a British-Swedish pharma company with its global headquarters in Cambridge, United Kingdom. The stock is traded on London Stock Exchange. The stock can also be purchased through major U.S. brokerage firms in the form of American Depository Receipts (ADRs), which are placeholder equities held in a trust by a bank that represent shares of a foreign stock. The company generated $24.4bn in revenue in 2019. Coronavirus vaccine is not its only focus. The company has a strong anti-cancer product line. However, given its involvement in the coronovirus vaccine race, the stock price has increased ~20% from pre-covid levels. The company also pays out a reasonable dividend every quarter, dividend yield around 4%. Human Trials showed that the vaccine candidate produced a promising immune response. In Oct 2020, the company received further funding from the US Government to produce antibody cocktails to treat Covid-19. India is world's vaccine manufacturing hub as more than 70% of vaccines are manufactured in the country. AstraZeneca has a parternship with Serum Institute of India to produce 1bn dozes of the vaccine after the clinical trials are successful and the government regulatory bodies have approved the vaccine. Overall, AstraZeneca is a leading contender to win the vaccine race.
Moderna (MRNA)
MRNA is an American biotechnology company based in Cambridge, Massachusetts. The company focusses on drug discovery, development and vaccine technologies based exclusively on messenger RNA (mRNA). The key difference between MRNA vaccine and the other vaccines is that Moderna vaccine aims to inject synthetic mRNA into living cells that would reprogram the cells to develop an immune response, rather than being created externally and injected as with conventional vaccines. This technique was widely considered by other pharamceutical companies but later abandoned as they were unable to overcome the side effects of inserting a synthetic RNA into living cells. No mRNA drug has ever been approved for human use to date. The company was publicly listed through IPO in Dec 2018. The stock price has more than doubled relative to pre-covid levels. The company generated ~$60mn in revenue in 2019. The current market cap is close to $30bn. The company's success is very tied to its coronavirus vaccine, mRNA-1273. If this vaccine were to clear FDA approval, the company will be set up for more success over the next 10 years with a disruptive vaccine technology fueling more growth opportunity in other vaccine areas. The company will also have further opportunity to partner with biggies like AstraZeneca who are also evaluating experimental mRNA based therapeutics for treating coronary artery disease and for treating cancer. Overall, Moderna is a high risk / high reward stock. Take a punt on it if you have the risk appetite to absorb potential losses.
Pfizer / BioNTech
Pfizer (PFE) is an American multinational pharmaceutical company. It generated $50bn in revenue in 2019. Advil, Viagara, Xanax, Zoloft - all products from Pfizer. The company is a medical giant but it has had its share of scandals and legal troubles. The company specializes in manufacturing drugs. For coronavirus vaccine, the company has partnered with BioNTech (BNTX), a German biotechnology company. BioNTech was founded in 2008 and it has a broad portfolio of product candidates in oncology. BNT162b2 is the coronavirus vaccine developed by BioNTech and manufactured by Pfizer. This vaccine is currently in Phase 3 clinical trials and is a leading vaccine candidate for approval by the FDA. Pfizer stock price is relatively flat as the company is not very dependent on coronavirus vaccine. BioNTech stock price is far more volatile as its success as a company is dependent on the success of its coronavirus vaccine. Overall, this partnership provides a good balance of risk. Even if they are not the first vaccine, there is a good chance that their vaccine will offer an alternative and potentially succeed. If you are looking to take a risk, go overweight on BNTX. If you are looking to stay safe, PFE is a stable stock to have in the portfolio. PFE is also in the S&P500 index.
Novavax
Novavax (NVAX) is an American vaccine development company based out of Maryland. The company's stock price soared nearly 4.5x during the first half of this year. In the past couple of months, the stock fell sharply but the stock is still up >2x for the year. Novavax's vaccine candidate is called NVX-CoV2373. The company kicked off a phase 1/2 clinical trial in late May. The vaccine has reported positive results in early August. The U.S. government awarded Novavax $1.6bn as part of its Operation Warp Speed to advance the manufacturing process of the vaccine candidate. The company does not have many products on the market at the moment, so track record and past performance is not very satisfactory. However, thanks to all the funding the company has received from various sources, it has a healthy cash balance on its balance sheet currently. Other than the Coronavirus vaccine, the company also has a promising program called NanoFlu - a potential flu vaccine for adults aged 65 and older. This candidate will compete against the current market leader in the space, Fluzone, which is developed and marketed by Sanofi. Overall, Novavax stock is probably worth taking a punt on at around $110 a share. I don't think the stock is worth buying anywhere close to its 52 week high (~$189) as I think the stock will not trade at those levels even with a successful coronavirus vaccine.
Final Thoughts
Amongst these four options, from a high risk / high reward perspective, I'd recommend - Moderna > AstraZeneca > BioNTech > Novavx > Pfizer. Its probably a good idea to have some level of investment across all of these companies as well.
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