AbbVie (ABBV) is a cutting-edge company specializing in small molecule drugs; the company has grown ...
5 Stocks in the Race for a Vaccine
08/24/2020 6:00 am EST
I can’t think of a more profitable investment than owning stock in the pharmaceutical company that ultimately wins the race to develop an effective Covid-19 vaccine, observes Jim Powell, editor of Global Changes & Opportunities Report.
Billions of people throughout the world will need to be inoculated against the disease that has killed over 600,000 people worldwide – and pushed the global economy into a recession.1 On a one to 10 scale of disruptive events, Covid-19 is a solid 12.
Several leading pharmaceutical firms and research labs are making progress towards developing a vaccine. Any one of them could be the multi-billion — or multi-trillion — dollar winner of the race. At this point, trying to pick the most likely vaccine producer would be highly speculative — with a low chance of success.
However, there is a way that aggressive investors can increase their odds of profiting handsomely from the vaccine race. The solution is to take positions in all five of the leading contenders for the prize: AstraZeneca (AZN), Pfizer (PFE), Merck (MRK), Moderna (MRNA), and Johnson & Johnson (JNJ).
Using a diversified strategy to profit from a Covid-19 vaccine makes sense for several reasons:
1. The five leading Covid-19 vaccine developers are shooting for a late 2020 or early 2121 rollout. If so, your money won’t be tied up for years as is the usual case with drug developments.
2. The winning company will see enormous profits even if it keeps the price of its vaccine not much higher than it costs to produce it — as some have promised. The developers will benefit from huge government purchases (that are always generously inflated), licensing fees, packaging and distribution fees, and other opportunities that are common in the pharmaceutical industry.
3. It is possible — some experts say probable — that more than one vaccine will be needed. Elderly people, for example may need a different vaccine than younger patients – as is already the case with seasonal influenza. That means the race for a vaccine may produce more than one winner.
4. Covid-19 is only one type of coronavirus. The SARS epidemic of 2003, and MERS in 2012, are also coronaviruses. Companies that are spending millions of dollars to find a Covid-19 vaccine are also learning about the entire coronavirus family of diseases. That research may lead to the development of other profitable preventions and treatments.
5. All five of the front-running companies in the Covid-19 race are pharmaceutical leaders with many successful products on the market — and many more under development. I believe all five companies will be excellent long-term investments. In other words, the risk is minimal from owning the companies that don’t win the Covid-19 vaccine race.
AstraZeneca is working in collaboration with Oxford University in the UK that developed one of the most promising Covid-19 vaccines.
AstraZeneca will provide the large scale production and distribution services that will be needed if the vaccine receives FDA approval. Because of the urgent need for a vaccine, it must only be 50% effective to get the government’s green light. Clinical trials are already underway — and they show great promise.
Astra-Zeneca is already a leader in the fields of oncology, cardiovascular disease, renal failure, respiratory diseases, and infections — to name only a few. The company is based in the UK, it does business worldwide, and is listed on the NYSE.
Pfizer is a successful producer of vaccines and treatments for pneumococcal disease, meningococcal disease, some tick-born diseases — and several others. In addition, the company makes medicines for a variety of human conditions including heart disease, osteoarthritis, and neurological disorders — to name only a few.
Pfizer’s list of products may be familiar to many GCOR readers who may take some of them. The list includes Eliquis, Prevnar 13, Enbrel, Chantix, and Xeljanz. Pfizer also has agreements with Bristol-Myers Squibb, Merck, IDEAYA Biosciences, and several others to develop and promote new products.
On July 22, Pfizer and BioNTec (BNTX) received a $1.95 billion government order for 100 million Covid-19 vaccine doses– IF it receives FDA approval. A similar agreement was signed with the UK government for 30 million doses. Pfizer was founded in 1849 and is one of America's oldest – and finest – blue chip companies.
Merck is also a leading producer of vaccines that are used worldwide. The list includes inoculations for measles, mumps, rubella, shingles, gastroenteritis, pneumococcal diseases, rotavirus, and others. Medicines that treat several other problems — such as diabetes, various cancers, and the side effects of chemotherapy, are also produced.
Merck also has a successful division that treats diseases in livestock and companion animals. The latter is one of the fastest growing industries in the US. The company also offers healthcare research services to other pharmaceutical companies including Astra-Zeneca and Bayer — to name only two. The company was founded in 1891.
Johnson & Johnson has been in our Portfolio #2, Basic Needs Suppliers for several years — and has been a good performer. Johnson & Johnson makes many popular pharmaceutical products that it markets worldwide, including Tylenol, Sudafed, Benadryl, Motrin IB — and others for treating common maladies.
Most American have at least one Johnson & Johnson product in their homes. The company’s home healthcare products include Band-Aids, Neosporin, and disposable contact lenses.
JNJ’s medical devices division primarily produces surgical supplies. More recently, Johnson & Johnson started a major program to develop a Covid-19 vaccine. Results so far have been encouraging. The company was formed in 1886.
On the downside, JNJ is being sued by people who allege that the company’s baby powder and other talcum products can cause cancer. It is clear from looking at JNJ’s stock chart that Wall Street is not particularly nervous about the lawsuits.
Moderna, Inc. is a biotechnology company that is also working to develop a Covid-19 vaccine. One product is currently in clinical trials, and is showing impressive results.
The company’s unique approach to creating vaccines uses messenger RNA (a close relative to DNA) to instruct a patient’s own cells to produce proteins that can prevent, treat, or cure diseases. This approach has great promise to treat dozens of diseases that aren’t responding to conventional treatments.
Moderna has strategic alliances with AstraZeneca. Merck, Vertex Pharmaceuticals, Defense Advanced Research Projects Agency (DARPA), the Bill & Melinda Gates Foundation, and Harvard University — all of which are also working to develop a coronavirus vaccine. In addition, Moderna is attempting to develop vaccines for cancer and other disorders. Moderna was founded in 2010.
Wrap-Up: It is tempting to pick one company that appears to be the most likely winner of the contest to develop a successful Covid-19 vaccine.
However, I believe that strategy would be a mistake. Your best odds of success is to take a position in all five of the leading developers. Stick with them until the winner becomes clear — and its vaccine has the FDA stamp of approval.
One caution is in order. It is possible that nobody will develop an effective Covid-19 vaccine. Even after billions of dollars — and years of research — there still isn’t a vaccine for the common cold. Likewise, it is possible — but not probable — that a company that’s not a current front-runner, will develop the most effective Covid-19 vaccine.
Related Articles on HEALTHCARE
The IPOs sector is beginning to reemerge and has many stocks that fit our stock picking criteria, no...
Alkermes (ALKS) announced overwhelming and surprising positive votes from the joint meeting of the P...
CVS Health (CVS) is an integrated healthcare services provider; the company operates more than 9,900...