Investors often chase the latest fads. In healthcare, the race to develop a vaccine for the novel coronavirus has certainly captured a significant share of Wall Street’s attention this year. Small companies making big promises may capture headlines, but established pharmaceutical companies with histories of creating blockbuster drugs and robust pipelines of new candidates are often the wiser bet. The positive vaccine results reported yesterday by Pfizer (NYSE:PFE) and partner BioNTech (NASDAQ:BNTX) would seem to bolster the argument.
Two stand out this month as representing the best of both worlds — companies with both solid drug-development track records and potential COVID-19 vaccine tailwinds that could net them each significant profits for their role over the next several years.
In recent years, Pfizer has been best known for prescription drugs including Xanax and Viagra. And while some may be aware of the 171-year-old company’s history in creating popular over-the-counter medicines such as Robitussin and Advil, these days, Pfizer is streamlining itself to focus on its patented drugs. To this end, it will shortly complete the spinoff of its off-patent business, Upjohn, which will immediately merge with generic drugmaker Mylan (NASDAQ:MYL).
While Pfizer has a wide pipeline of drugs in development targeting rare diseases, cancer, inflammation, and more — not to mention a number of vaccine candidates — its potential COVID-19 vaccine, on which it has partnered with BioNTech, is getting by far the most attention today. Monday’s news of the company’s vaccine candidate being 90% effective at preventing COVID-19 only raises that drug’s profile even further above others in the portfolio.
BioNTech and Pfizer have enrolled 42,000 participants across 150 sites in six countries in their coronavirus vaccine trial. Now that the company has received positive data from this trial, management will be able to file for an emergency use authorization (EUA) from the U.S. Food and Drug Administration (FDA) at the end of two months of data collection, or the third week of November. This would allow the vaccine to be used on a limited basis under what the Secretary of Health and Human Services has declared a public health emergency.
So far, the partnership has deals in place to supply up to 600 million doses to the U.S. government, another 200 million to the European Union, and 10 million to Australia. The companies plan to produce 1.3 million doses by the end of 2021. Pfizer shares provide the stability of a historically successful business, and there is strong upside possible if this exciting candidate in the fight against coronavirus is approved.
Lonza Group AG
Lonza Group (OTC:LZAGY) is a little-known Swiss business that plays a critical role in the healthcare world. The company, founded in 1897, is a contract manufacturer that serves pharmaceutical, biotech, nonprofit, consumer, and industrial customers. Its four divisions — capsules, small molecules, biologics, and cell and gene therapy — cover the past, present, and future of drug development and specialty chemicals. While it may not be well-known, since 2013 this $51 billion company has grown sales and net income by more than 65% and 247%, respectively. In May, it joined the coronavirus fight, signing a 10-year deal with Moderna (NASDAQ:MRNA) to manufacture ingredients for that company’s COVID-19 vaccine candidate.
Lonza is investing heavily in the venture, building a facility in the Swiss Alps and creating three new production lines in New Hampshire to begin manufacturing this month. In these locations, the ingredients for Moderna’s treatment are are created and frozen to -70 degrees Celsius before being shipped to another facility for a final stage of manufacturing. Lonza will be supporting the deals Moderna has signed with the U.S. (100 million doses), the European Union (160 million doses), Canada (20 million doses), Japan (50 million doses), and Qatar (an undisclosed amount).
Management is confident they can produce 500 million doses per year, with a stretch goal of a billion annually. With deals in place, facilities under construction, and a demonstrated expertise in producing special ingredients for drug companies, Lonza Group offers investors another way to profit from the money pouring into vaccine research for the coronavirus, while investing in an established, well-managed company.
Has the vaccine race been won?
With almost 8 billion people on earth, and most COVID-19 vaccines requiring two doses, it will take a long time and many approved vaccines to get life back to normal. While Pfizer’s candidate reported exciting results, it is just a first step toward vaccinating people and putting the scientific advance into action.
Pfizer is now close to receiving a green light to produce and distribute hundreds of millions of doses of its vaccine candidate across the globe in the next year. With Moderna’s results pending, more exciting news could be on the horizon, and if those results are good, Lonza Group will be set to produce up to a billion doses of that vaccine. Despite the stock market’s euphoria over Pfizer’s news, both Pfizer and Lonza Group continue to represent the best pharma stocks to buy in November.