Mercedes or Porsche? Steak or sushi? Two things can both be good but very different. For investors, the best coronavirus stock may depend on who’s choosing. Breaking down the pros and cons of Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX) reveals two very different companies linked by more than their partnership on a COVID-19 vaccine. So how do you choose between buying these two stocks, or do you really have to?
What the future holds
Pfizer and BioNTech are at opposite ends of the spectrum in terms of corporate lifespans. As a $218 billion company founded 170 years ago, Pfizer is about as old as companies get. With 92 treatments in various stages of clinical trials and 49 individual drugs generating $52 billion in revenue, Pfizer is the definition of a blue-chip stock. Perhaps because those sales sit exactly where they were in 2013, the company has been transforming itself. The moves include merging Upjohn, its off-patent drugs division, with Mylan to form a new entity named Viatris (NASDAQ:VTRS). With a renewed focus on more profitable oncology drugs and vaccines, Pfizer’s management is betting that growth will return.
Unlike Pfizer, BioNTech was founded in 2008, and its paltry sales are associated with collaboration agreements, not commercialized drugs. Despite the lack of sales, the company sports a $26 billion market cap as investors anticipate the company’s pending share of profits from the COVID-19 vaccine. There is more than the vaccine to generate excitement. In a 2017 study, the company’s gene-based approach created increased immunity in skin cancer patients, preventing new lesions from forming. This result has encouraged its pursuit of treatments for cancer of the lungs, ovaries, breasts, prostate, head and neck, and solid tumors. The pipeline also contains an early-stage flu vaccine being developed with Pfizer.
There are other factors to consider beyond a drug pipeline and product sales when deciding between companies. Intangibles, such as leadership and the company’s purpose may also help predict how the company will fare over the long term.
Pfizer CEO Albert Bourla has worked at the company for 25 years but only took the helm in 2019. A few of his decisions indicates an attempt to reshape the company from a stodgy old pharmaceutical company into an innovator as in its glory days as the world’s largest pharmaceutical company. Announcing the Upjohn spinoff in 2019 sent a clear signal that the company wanted to streamline around faster-growing, more profitable medicines. Only a month earlier, the company had agreed to buy cancer drugmaker Array Pharmaceuticals for $11.4 billion.
Capital allocation isn’t something BioNTech shareholders have to think much about as the company has yet to generate operating cash flow. The founders — Dr. Ugur Sahin and Dr. Ozlem Tureci — have a vision to individualize cancer medicine. This isn’t their first company or the first time they’ve been at the cutting edge of medicine. In 2001, the married pair started a firm that developed monoclonal antibodies to treat cancer, selling it in 2016 for $1.4 billion. Although the couple has said they want to build a large pharmaceutical company, don’t let those lofty aspirations make you think they are not interested in anything but science. The couple lives with their teenage daughter in a small apartment near the office and ride bicycles to work, according to a New York Times profile.
Which stock to buy?
One way to choose between two companies is to look at who else has chosen them as a partner. Since Pfizer is a large pharma company, it’s no surprise they have a lot of relationships. What is surprising is how many organizations have chosen to partner with BioNTech. The list includes the Bill & Melinda Gates Foundation and large pharma companies such as Roche, Bayer, Eli Lilly, Sanofi, Genmab, and Regeneron. Pfizer was also a partner a few years before they teamed up on a COVID-19 vaccine.
With BioNTech, you get a company with focused leaders and a clear purpose at the cutting edge of medical research. Pfizer is doing its best to return to a time when it fit that description. The two companies will split the windfall associated with the COVID-19 vaccine but spend it in very different ways. For Pfizer, the success will fill the coffers leading to perhaps more acquisitions, dividends, or stock buybacks. The company already has more than $10 billion on the balance sheet. For BioNTech, the success represents fuel for the company’s other development programs as it applies its now validated gene-based approach to other diseases. Both stocks may represent good investments, but the better coronavirus stock for me is BioNTech — the company that knows what it is, not the one trying to get back to what it once was.