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 by Pfizer (PFE 0.23%) and partner BioNTech (BNTX 0.16%) 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.
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Pfizer
In recent years, Pfizer has been best known for drugs like 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 Mylan (MYL), a generic drug maker.
Despite Pfizer having a wide pipeline of drugs in development for rare diseases, cancer, inflammation and immunology, and a number of vaccine candidates, it's the vaccine candidate for COVID-19 that most are keenly aware of. The news of the company's vaccine candidate being 90% effective at preventing COVID-19 only raises that drug's profile above others in the portfolio.
The company has partnered with BioNTech to develop a vaccine for the coronavirus, and currently has 42,000 participants in six countries across 150 sites. Now that the company has received positive data from its vaccine trial, management will be able to file for Emergency Use Authorization (EUA) at the end of two months of data collection -- the third week of November. This would allow the unapproved vaccine to be used on a limited basis since the Secretary of Health & Human Services has declared a public health emergency.
With deals 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 the upside if this exciting candidate in the fight against coronavirus is approved.
Lonza Group AG
Lonza Group (LZAGY -0.76%) is a little-known Swiss company that plays a critical role in the healthcare world. The company, founded in 1897, is a contract manufacturer that serves pharmaceutical, biotech, non-profit, consumer and industrial customers. The company's 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 more than 65% and 247%, respectively. In May, the joined the coronavirus fight, signing a 10 year deal with Moderna (MRNA -0.74%) to manufacture ingredients for the company's COVID-19 vaccine candidate.
Lonza is investing heavily for the venture, building a facility in the Swiss Alps and creating three new production lines in New Hampshire to begin manufacturing this month. The ingredients 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. for 100 million doses, the European Union for 160 million doses, Canada for 20 million doses, 50 million doses for Japan, and an undisclosed amount for Qatar.
Management is confident they can produce 500 million doses per year, with a stretch goal of one 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 eight 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 in toward vaccinating people and profiting from the scientific advance.
Pfizer is now close to a green light to produce and distribute hundreds of millions of doses across the globe in the next year. With Moderna's results pending, more exciting news could be on the horizon. When reported, 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.
