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Who will win the Covid-19 vaccine race?
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Should You Buy Biotech Stocks in the COVID-19 Vaccine Race?
One offers massive potential for gains. The other offers security.
Clinical-stage biotech’s including Moderna (NASDAQ:MRNA) and Novavax (NASDAQ:NVAX) and big-pharma players such as Pfizer (NYSE:PFE) and AstraZeneca (NASDAQ:AZN) are sharing the spotlight in the coronavirus vaccine race. Between them, these companies have won billions of dollars in U.S. government funding for their programs, which are nearing the finish line.
But share-price gains for the biotech companies have largely surpassed those of their pharmaceutical rivals. Since the start of the year, for example, Moderna and Novavax are up 261% and 2,612%, respectively. During the same period, Pfizer is down 7.7% and AstraZeneca is up 11%. On the surface, it seems buying biotech stocks instead of pharmaceutical companies is a winning strategy. But it isn’t as simple as that. Let’s take a closer look to see where you should put your money in this race.
IMAGE SOURCE: GETTY IMAGES.
Scoring two victories
First of all, it’s clear that a clinical-stage biotech company has more potential for share movement on coronavirus news. It doesn’t have other products on the market, so if it wins the vaccine race, it scores two victories: It gets a product out there, and that product is one that’s desperately needed in countries around the world. The market value of clinical-stage biotech’s also allows more room for gains. For example, Moderna’s market capitalization is $27 billion, while Pfizer’s is $200 billion.
MRNA MARKET CAP DATA BY YCHARTS
But with this potential for great gains comes the potential for great losses. Any setback may be severely punished, because these companies’ near-term prospects rely so heavily on their coronavirus programs. Clinical-stage biotech Inovio Pharmaceuticals (NASDAQ:INO) sank by 33% over two trading sessions after the U.S. Food and Drug Administration (FDA) said it needed more information before the company could proceed with its vaccine candidate’s phase 2/3 trial. Meanwhile, when AstraZeneca’s U.K. trial was temporarily halted due to the unexplained illness of a participant, the shares slipped by less than 2%. So, while big pharma companies haven’t soared on good news, they haven’t fallen much on bad news either. And over time, AstraZeneca and Pfizer have registered positive stock performance.
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