With the novel coronavirus infecting more than 10 million people globally, there is a rush for vaccine development. The world might still be a few quarters away from a potential vaccine, however, there are reasons to be optimistic considering the results of initial clinical trials.
From an investment perspective, the vaccine and drug development factor is likely to keep pharmaceutical stocks in focus.
I will discuss four pharmaceutical stocks that are worth investing or keeping on your investment radar.
Let’s take a deeper look into these names.
4 Pharmaceutical Stocks to Watch: Pfizer (PFE)
Among the large number of pharmaceutical stocks, PFE stock is worth keeping in the investment radar. Recently, Pfizer and partner BioNTech SE (NASDAQ:BNTX) have announced preliminary results from early phase clinical trials. The results have been encouraging and PFE stock is trading higher by 4.5%.
Besides the vaccine development for the novel coronavirus, Pfizer is also interesting from a long-term perspective. The company’s bio-pharma revenue for the first quarter of 2020 increased by 12%. In emerging markets, the segment revenue growth was 15%.
In addition, the company has a deep pipeline of drugs that can translate into top-line growth in the coming years. It’s worth noting that the company expects operating cash flow of $10 to $11 billion for the year. From a fundamental perspective, the company is attractive. With robust cash flows, the company’s dividend pay-out is likely to increase.
However, in the medium-term, the focus is likely to remain on the COVID-19 vaccine development. On that front, the company is making steady progress, implying further stock upside.
Gilead Sciences (GILD)
In the last six months, GILD stock has trended higher by almost 17%. I believe that the positive momentum for the stock is likely to continue through the year.
With a renewed surge in the novel coronavirus infections in the United States, the government has purchased “nearly all of Gilead’s Covid-19 drug remdesivir.”
Further, the European Medicines Agency’s advisory group has also backed the drug for COVID-19. Nine companies have partnered with Gilead Sciences for the manufacture of remdesivir for distribution in poorer countries.
Therefore, there is a revenue bump-up likely in the coming quarters and strong numbers are expected well into the next year. To put things into perspective, the company expects to increase remdesivir units manufactured to 1,000,000 in December 2020 from 140,000 in May 2020. This makes GILD stock interesting even after the run-up.
Besides the COVID-19 drug, the company’s HIV franchise has already delivered strong growth. For the first quarter of 2020, the segment reported 14% year-on-year growth.
In the last six months, MRNA stock has surged by 226% and currently trades at $61. I believe that MRNA stock is a speculative play in the COVID-19 vaccine development rush. Therefore, a big plunge in the stock should be avoided.
Moderna has already received the fast track designation for the mRNA vaccine by the U.S. Food and Drug Administration. This is the reason for the sharp surge in the stock.
In June 2020, the company also announced a late state development of the vaccine against the coronavirus. With the Phase 3 study beginning this month, investors are eagerly waiting for the results.
Positive news on this front can send the stock surging further. On the flipside, if the results are not encouraging, the downside can potentially plummet. Further, Moderna does not have any track record of drugs and vaccines. Therefore, investors need to be cautiously optimistic.
Johnson & Johnson (JNJ)
Among the bigger names in the pharmaceutical industry, I would like to keep JNJ stock on the radar. With an annual dividend pay-out of $4.04, coupled with dividend growth visibility, JNJ stock is worth considering for income investors.
However, for the current year, the stock is likely to be in focus for it’s COVID-19 vaccine development. In June 2020, the company announced that Phase 1/2a clinical trial of the vaccine will begin this month. The company is also targeting the commencement of Phase 3 trials ahead of schedule.
Johnson & Johnson expects to deliver one billion doses of the vaccine through fiscal year 2021 if the results are positive. This target is enough to keep investors interested in the company, which already has high focus on research and development.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector. As of this writing, he did not hold a position in any of the aforementioned securities.