- AstraZeneca (AZN) has incremental revenue visibility from the antibody cocktail against covid-19
- Pfizer (PFE) has a robust backlog of vaccine doses. Additional booster shot to provide revenue upside.
- Moderna (MRNA) continues to increase its backlog for 2022. Potential catalyst is vaccine for kids under six.
Covid-19 and its variants have been as unpredictable as the markets in the first few months of 2022. Earlier this year, there was growing optimism about the pandemic shifting to an endemic with the mild omicron variant. This had resulted in a correction in vaccine stocks.
It seems, as a species, we keep underestimating the proliferation of this virus and its variants. In March 2022, China has already imposed lock-downs in big cities as the country fights against the virus. Even in Europe, cases have been surging as a result of a new variant, omicron BA.2.
Given this scenario, countries are preparing for an additional booster shot. There might also be a case for annual booster shots if covid-19 variants continue to concern governments.
For vaccine stocks, the current covid-19 situation would imply further revenue and cash flow visibility. This is likely to come through additional booster doses and vaccines for younger age groups.
It’s also worth mentioning “just over three per cent of people in low-income countries had been vaccinated with at least one dose, compared to 60.18 per cent in high-income countries.” Wider vaccination coverage is essential in low-income countries to curb new variants. This is another potential revenue upside source for vaccine majors.
Therefore, vaccine stocks remain an attractive investment bet through 2022. Let’s discuss three vaccine stocks that are best positioned to benefit from additional demand for doses.
Vaccine Stocks to Buy: AstraZeneca (AZN)
AstraZeneca (NASDAQ:AZN) has been among the leading players in terms of revenue upside from the covid-19 vaccine. As I write, the company’s antibody combination has been approved in the European Union for prevention of covid-19 in a broad population.
The drug has already been approved in the U.S. and U.K. As covid concerns persist, the cocktail is likely to have an incremental impact on revenue. Additionally, with authorization likely in more countries, the revenue potential can be significant.
For 2021, AstraZeneca delivered 2.5 billion doses of the covid-19 vaccine. For the current year, the company is expecting revenue growth from covid-19 medicines at low-to-mid-twenties percentage. A relative decline in vaccine revenue is expected to be offset by growth in sales from the cocktail antibody.
Looking beyond the covid-19 vaccine, AstraZeneca expects double-digit revenue growth through 2025. This seems entirely likely considering the point that the company has a deep pipeline of candidates in late-stage trials.
AZN stock has trended higher by 15% year-to-date (YTD). At a forward price-to-earnings-ratio of 19.5, the stock looks attractive for further upside. Additionally, AZN stock offers a healthy dividend yield of 2.19%.
After an extended period of sideways movement and consolidation below $40, Pfizer (NYSE:PFE) stock had a convincing break-out. The stock still looks attractive at a forward P/E of less than 10 and a dividend yield of 3%.
With the renewed surge in covid cases, Pfizer is among the top vaccine stocks to consider. Recently, it was reported that President Joe Biden’s administration plans a second booster dose for Americans aged 50 and older. This is likely to benefit Pfizer.
Pfizer is also among the few pharmaceutical companies that’s focused on finding treatment for long-covid. These are symptoms impacting million of people after a severe covid-19 infection. Over the next few years, this is another potential source of revenue upside for Pfizer.
For 2022, Pfizer has guided for revenue in the range of $98 to $102 billion. This would imply a 24% revenue growth (mid-range of guidance) on a year-on-year basis. Therefore, the covid-19 vaccine will continue to have a positive impact on revenue and cash flow through 2022. Additional booster doses in 2022 might also imply revision of guidance on the upside.
Pfizer also has a robust pipeline of drugs in various stages of trials. Currently, ten drugs are in the registration phase with another 27 in phase three trials. With ample financial flexibility, the company’s product pipeline will continue to expand. PFE stock is therefore attractive for long-term investors.
Vaccine Stocks to Buy: Moderna (MRNA)
Moderna (NASDAQ:MRNA) stock traded at all-time highs of $498 in August 2021. There has been a meaningful correction from those levels with the stock currently at $175. It seems that the downside is over for MRNA stock and a sharp reversal rally can be expected.
I mentioned earlier about a second booster dose for Americans above 50 years of age. Moderna stands to benefit from this along with Pfizer.
Another potential catalyst for Moderna is a potential covid-19 vaccine for children under six years old. The company recently announced that the Phase 2/3 study in children has successfully met its primary end-point. If the company gets an approval from the U.S. Food and Drug Administration in the coming quarters, the stock is likely to surge. The approval will also open-up a broader addressable market, which includes Europe.
In February 2022, Moderna had announced that it has signed advance purchase agreements for vaccines worth $19 billion for the year. One month down the line, the value of the APAs had swelled to $21 billion. The company is negotiating for further orders in the current year and for 2023. The robust order backlog provides clear cash flow visibility, which will help the company deepen its pipeline of candidates for long-term growth visibility.
Overall, the worst seems to be over for MRNA stock. Fresh exposure can be considered at current levels from a 12-month investment horizon.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.