Ideally, after the novel coronavirus first upended our lives, health experts wanted to see the nation adopt social distancing and mitigation protocols to flatten the infection curve. Obviously, that didn’t happen. Instead, we’re now facing a blistering surge of Covid-19 cases. That brought the focus on biotech stocks and the industry’s ability to forward a vaccine. Against incredible odds, both Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) delivered some encouraging results.
First, Pfizer pleasantly shocked the healthcare industry with early trial data demonstrating that its vaccine candidate is more than 90% effective. Then, seemingly in a game of one-upmanship, Moderna reported that its early data demonstrated an effectiveness rate of 94.5%. At such lofty levels, these potential long-term coronavirus solutions are on par with childhood vaccines. This is more remarkable considering that vaccines usually take many years to research, develop and distribute.
Interestingly, both vaccines are based on messenger RNA. Essentially, bioengineers inject into patients the “recipe” for their cells to produce antibodies to the SARS-CoV-2 virus. On paper, this is a safer approach than traditional vaccines, which involve injecting a dead or inactivated form of the target virus. Thus, one of the advantages of RNA-based vaccines is the platform’s non-infectious nature. But with such positive news, where does that leave other biotech stocks?
Before investors jump onboard the PFE or MRNA bandwagon, it must be noted that the vaccine race is still a complicated one. Primarily, the much-touted effectiveness rate will probably decline: the timeframe is extremely limited and we need to see more information regarding elderly people, which is a high-risk group. Further, long-term immunogenicity is still a big question mark. In other words, what is the probability of reinfection?
Another key point to note is that nucleic-acid-based (RNA and DNA) vaccines have never been approved by the Food and Drug Administration. In part, that’s because extensive tests of RNA vaccines on humans have not been conducted. Thus, inquiries about safety and efficacy remain, which means that in principle, these biotech stocks are still relevant.
- Novavax (NASDAQ:NVAX)
- Johnson & Johnson (NYSE:JNJ)
- AstraZeneca (NASDAQ:AZN)
- Inovio (NASDAQ:INO)
- Sorrento Therapeutics (NASDAQ:SRNE)
- Abbott Laboratories (NYSE:ABT)
- Gilead Sciences (NASDAQ:GILD)
- Regeneron Pharmaceuticals (NASDAQ:REGN)
Of course, the most critical point to consider is that the coronavirus pandemic is a highly fluid crisis. Therefore, don’t look at this list of biotech stocks as necessarily recommendations to buy or sell. Instead, this article will cover the relevance and risk profiles of the hot names during this radical paradigm shift.
Vaccine Stocks: Novavax (NVAX)
Before the pandemic, Novavax was on life support. Suddenly, though, the novel coronavirus gave this previously embattled organization a crucial lifeline. Thus, NVAX stock is one of the most fortunate investments among biotech stocks. But after drilling into the science, I came away with the conclusion that Novavax’s subunit vaccine is also one of the most promising. Therefore, it wasn’t terribly surprising that shares took a hit following Pfizer’s potentially groundbreaking announcement.
But does that mean NVAX stock is now in the doghouse? Far from it. As I mentioned earlier, one of the main problems with RNA vaccines is that they have never been approved. However, the underlying subunit approach has been proven clinically effective, most notably with the hepatitis B vaccine. With so many conspiracy theories circulating regarding Covid-19 vaccines, those on the fence may be more willing to take a solution with an established track record.
Nevertheless, this doesn’t mean Novavax is without its own challenges. Long-term efficacy is still a question mark, although subunits get a nod for being applicable to people with weakened immune systems. Plus, the manufacturing process for subunits can be lengthy, complicated and expensive.
Still, the bottom line is that Novavax offers a proven anchor compared to the experimental RNA vaccines. Therefore, NVAX is one of the biotech stocks to watch closely.
Johnson & Johnson (JNJ)
Johnson & Johnson provides a classic example of why you shouldn’t get too excited about vaccine-related biotech stocks until the deal is sealed. The company’s “vaccine candidate is a recombinant vector vaccine that uses a human adenovirus to express the SARS-CoV-2 spike protein in cells. Adenoviruses are a group of viruses that cause the common cold. However, the adenovirus vector used in the vaccine candidate has been modified so that it can no longer replicate in humans and cause disease.”
While viral-vector vaccines offer extraordinary applications for next-generation medical solutions, regarding the coronavirus, JNJ stock stood out because the underlying candidate could potentially be delivered in a one-dose regimen. That’s an incredibly important advantage over RNA and subunit vaccines, which most likely will involve two-dose regimens. But are viral vectors safe?
Clinical trials have demonstrated promising results, although the use of a virus as a vector (carrier) could potentially cause problems. Unfortunately, Johnson & Johnson had to pause its coronavirus vaccine trial because a participant came down with an unknown illness.
Where does this leave JNJ stock moving forward? As a Covid-19 play, I’m intrigued by its one-dose solution, which will be a massive logistics-based advantage. For me, it remains one of the biotech stocks to keep on your radar.
Another example of biotech stocks levered to the viral-vector approach is AstraZeneca. While the platform is more experimental than the traditional vaccine methodology, one of the most promising aspects of adenovirus-vectored vaccines is their efficacy. According to the peer-reviewed medical journal The Lancet, AstraZeneca’s candidate demonstrated robust immune response with a single intramuscular injection.
On paper, that was a big win for AZN stock. Of course, efficacy is just one aspect of the vaccine profile. It must be safe for the population at large, which is where AstraZeneca fell short.
As with Johnson & Johnson, AstraZeneca had to pause its clinical trials when one of its U.K.-based participants came down with an unexplained illness. Fundamentally, this raised many eyebrows against AZN stock. Still, it must be noted that AstraZeneca may get a reprieve.
According to the Wall Street Journal, the company’s Covid-19 vaccine candidate “showed promising immune responses in elderly and older adults, with fewer serious side effects than in younger volunteers.” Moreover, this observation has been peer-viewed (also by The Lancet), giving AZN a much-needed credibility boost.
Moving forward, it’s possible we could see a multi-pronged vaccine approach determined by demographic category and risk profile. In my opinion, AZN remains one of the biotech stocks to watch.
At the initial onset of the novel coronavirus pandemic, Inovio was easily one of the most viable biotech stocks. Frankly, the company shocked the broader healthcare community by proposing a vaccine candidate through analysis of the SARS-CoV-2 genetic sequence, rather than assessing the virus itself. Undoubtedly, this contributed to the explosive rise of INO stock.
However, as a wide range of pharmaceutical companies began entering the space, Inovio found itself lagging the competition in terms of advanced-stage clinical trials. A major hindrance for the company was its specialization in DNA vaccines. To recap quickly, RNA primarily resides in the cytoplasm, not in the nucleus where our DNA is located. Therefore, the risk of host-genome integration should be theoretically minimal for RNA vaccines (Pfizer, Moderna) but potentially higher for DNA vaccines.
Most critically, it appears the FDA is still concerned about the possible negative implications of DNA vaccines. After all, for Inovio to enter a Phase 3 clinical trial, management must answer questions about its Cellectra delivery device. This is the platform to insert the DNA-based vaccine into the patient.
If the FDA’s concerns are not satisfactorily met, Inovio could end up plummeting in a hurry. Therefore, you can consider INO stock as a high-risk, high-reward venture that most conservative investors should avoid.
Sorrento Therapeutics (SRNE)
Pound for pound, Sorrento Therapeutics could be the most popular name among coronavirus-related biotech stocks. Younger investors have gravitated toward SRNE stock, making it one of the top Robinhood listings. Also, veteran investors love Sorrento’s upside potential. This is probably because the company has made an all-out pivot to Covid-19.
From treatments to testing apparatuses to a vaccine, Sorrento has it all. I could be wrong, but I don’t think any other biotech/pharmaceutical firm has as many dogs in the fight. On the surface, such broad exposure has its advantages: if one cog goes down, there are other cogs ready to take its place. But that’s also part of the problem.
You see, there’s nothing truly special about Sorrento’s solutions. For instance, its vaccine candidate incorporates the subunit approach. That means it will most likely mirror the Novavax candidate’s pros and cons. Namely, it should be reasonably safe, particularly for those with compromised immune systems. However, it will likely be a multi-dose regimen, which would make it logistically unfavorable.
A better approach would be specialization. This way, if one format is deemed ineffective for a particular demographic, Sorrento could step in. But with such a wide spectrum, the company must compete with multiple biotechs, making SRNE stock riskier than you might initially think.
Abbott Laboratories (ABT)
If you’re looking for a boring but reliable play among Covid-19-geared biotech stocks, Abbott Laboratories is your ticket. As one of the leaders in the testing and diagnostics space, ABT stock has enjoyed robust growth this year. Again, it’s a conservative investment, so you’re probably not going to get rich with this idea. However, the company will most likely be relevant no matter which way the coronavirus pandemic heads.
First, the reading of the tealeaves suggests that Pfizer and Moderna are in prime position to receive a green light from the FDA. But as we discussed, long-term efficacy of RNA vaccines is open for debate. Therefore, even with RNA-based solutions, health experts will probably recommend people get tested for Covid-19. Therefore, ABT stock should benefit from continued demand.
Second, testing along with mass-scale vaccinations will be vital to fully reopen the economy. But this recovery process will occur in stages, not all at once. Because the transition to normalization will be lengthy, more upside should be available for ABT stock.
Third, the soaring volume of cases should provide Abbott with an extra jolt of relevance. Thus, I like ABT for consideration now and as a longer-term investment.
Gilead Sciences (GILD)
While vaccines represent the landmark goldmine for biotech stocks, the space is fraught with risk because of the complex and lengthy development process. Furthermore, vaccines don’t do much for people who have been infected now with Covid-19. Therefore, Gilead Sciences was one of the early benefactors of this crisis thanks to its therapeutic drug remdesivir (now marketed as Veklury due to FDA approval).
According to the New England Journal of Medicine, remdesivir/Veklury was “identified early as a promising therapeutic candidate for Covid-19 because of its ability to inhibit SARS-CoV-2 in vitro.” Further, the journal concluded that the therapeutic “was superior to placebo in shortening the time to recovery in adults who were hospitalized with Covid-19 and had evidence of lower respiratory tract infection.” Fundamentally, this should have been a boon for GILD stock.
Unfortunately, Veklury has been dogged by questions about its true effectiveness, as well as a lack of research. Because of this dark cloud, GILD stock hasn’t been a strong contender in the second half of the year. Still, with Covid-19 cases rising again, this might be worth consideration for speculators.
Regeneron Pharmaceuticals (REGN)
Among biotech stocks, the company that received a baptism of fire was undoubtedly Regeneron Pharmaceuticals. Shortly after President Trump mocked Joe Biden in the first presidential debate for showing up “with the biggest mask I’ve ever seen,” the Commander-in-Chief came down with Covid-19.
Despite the rancor of the political race, people across the ideological spectrum wished the President well. After all, having the President incapacitated at a time like this would be extremely detrimental to the U.S. Thankfully, Trump recovered and that was largely due to Regeneron Pharmaceuticals — along with the President’s beautiful immune system, which I heard was the best in the world.
As you know, Regeneron manufactured an experimental antibody cocktail, which apparently did the job. Obviously, this was crucial for REGN stock because the underlying company had no room for error. It’s no hyperbole to say that the fate of the world rested on its shoulders.
Just recently, the FDA granted Regeneron with an emergency use authorization. It couldn’t have come at a better time, considering that new coronavirus cases are jumping to absurd levels. Contextually, I believe REGN stock is worth a look in the intermediate term, although I wouldn’t expose myself too heavily.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.