The pharmaceutical industry accounts for over $1.25 trillion of sales every year. And with the onset of the coronavirus pandemic, many investors are looking for a way into this enormous market that has the unique potential to help people and also turn a profit.
So, with that in mind, here’s a list of five of the best drug stocks to buy right now.
Moderna Sales Bonanza Set To Continue
Moderna had an amazing end to an already good 2020, when the Food and Drug Administration (FDA) granted an Emergency Use Authorization for its COVID-19 vaccine, mRNA-123, in December of last year.
From lows of around $20 at the start of 2020, MRNA share price enjoyed a surge to an all-time high of $189.26 in February 2021, but has since pulled back.
The company is the main beneficiary of the sales revenue bonanza arising from the worldwide race to find a vaccine for the COVID-19 virus.
Moderna reported $571 million of revenue in its Q4 figures, beating estimates by a huge margin of over $291 million. It is predicted to make around $11 billion in sales during 2021, taking the largest share of the $39 billion COVID-19 vaccine market.
So far, Moderna management has not made any forward-looking statements as to how they expect 2022 revenues to play out.
Assuming that sales and profits decline between 2021 and 2022, valuing this stock could be tricky. The company is still the main winner when it comes to revenue generation from pandemic vaccine sales, but that is unlikely to remain the case.
From 2022 on, governments are likely to source their vaccines more evenly from all the suppliers of COVID-19 vaccines, eroding away Moderna’s sales edge. Add to this the storage issues that have plagued the RNA-style vaccine type, and Moderna’s dominance looks even more precarious.
Still, this bearish case requires a number of headwinds to manifest themselves in the coming years, and that isn’t guaranteed. So investors who feel bullish about Moderna’s 2021 sales might think about getting into the stock during this current market dip.
Sanofi Undervalued Based On Comps
Despite not being a first mover in the race to develop a COVID-19 vaccine, Sanofi still offers a great value play for those wanting to take a more unconventional position with regard to the market opportunities arising from the pandemic.
Sanofi’s first foray into the COVID-19 vaccine quest was hit by a number of setbacks in late-2020. The company decided to halt development of its vaccine in December last year due to an unsatisfactory immune response in older patients.
But the firm redoubled its efforts alongside its partner GlaxoSmithKline (GSK) with an improved antigen dosage. The vaccine is being designed using a combination of Sanofi’s recombinant technology and GlaxoSmithKline’s immunologic adjuvant AS03 product, and if all goes well, Sanofi plans to file for regulatory submission in the second-half of 2021.
So what makes Sanofi an attractive buy right now?
Well, first of all, it currently boasts great financial multiples when compared to its peers in the sector, suggesting it is undervalued at the moment.
Its PE Ratio stands at around 10, with rivals such AstraZeneca (AZN) and Novartis at 40 and 24, respectively. The company also has an admirable EV/Revenue multiple of 2.77, beating AstraZeneca (AZN), GlaxoSmithKline (GSK), Novartis (NVS), and Pfizer’s numbers of 5.2, 2.9, 4.3 and 4.9.
But, perhaps most importantly, Sanofi also has a great pipeline of other pharmaceuticals in the works. And if the vaccine play comes off, the cash flows from that bounty should help the development and market-launch of those other products, ensuring sales and revenue growth well into the future.
Pfizer A Huge Winner From Vaccine Rollout
Despite the unprecedented focus of the world’s attention on drug companies right now, it might be surprising to some investors to find that pharmaceutical stocks are actually underperforming the wider market by what could be a 60% discount.
A solid dividend stock like Pfizer (PFE) might be a good hedge play for if, and when, the drug market rebounds and makes up the lost ground between itself and the S&P 500.
Pfizer’s total revenues for 2020 generated $42 billion, which represented an increase of 2% year-on-year. And just like Moderna, Pfizer is also doing very well out the COVID-19 vaccine pandemic race.
The firm is expected to take the second largest share of 2021’s vaccine sales, with $15 billion out of the $39 billion on offer.
Looking forward, Pfizer’s pipeline of other drugs and products seems pretty healthy too. There are 95 projects currently in its portfolio, with should cover the expected loss of patents that will begin to hit revenues from 2026 onward.
And with a forward PE of somewhere around 11, the company is looking like a bargain proposition if everything remains on track.
Novavax A Late Bloomer With Huge Revenue Potential
Even though Novavax has been around for over thirty years, it was only in 2021 that the company was able to successfully launch its first product. But fate has been kind to the Maryland-based outfit, and the arrival of the coronavirus pandemic has opened up the prospect that the firm could be on the verge of making billions in revenue on the back of a successful COVID-19 vaccine.
With regulatory approval now the next step, and agreements with the Vaccine Alliance and other nations such as Canada, New Zealand and the UK already fleshed out, things are certainly looking up.
The latest clinical trial results suggest that its vaccine is “100% effective” against the most severe strain of the original COVID virus variant.
But a hint of caution might be wise for potential investors about to dive into Novavax stock; despite revenue increases of over 75% on a quarter-by-quarter basis, the company is still operating at a net loss, with Research & Development and other costs totaling $460 million, easily outstripping revenue for the quarter.
Sales numbers in the future will have to be good, combined with a more streamlined operating structure, for Novavax to make a worthwhile profit. But if they manage it, this stock could skyrocket in no-time.
Johnson & Johnson Can Leverage Brand To Win
Johnson & Johnson is another late-comer to the COVID-19 vaccine scene, but although it might have missed taking a large chunk out of the current market share revenues, this well-established company has used its long experience to negotiate possibly the best deal of the lot from the US government.
As it is, the agreement between Johnson & Johnson and the Biden administration is for an order of 100 million vaccines to be rolled out before the end of the second quarter, 2021.
But the easy storage demands of the Johnson & Johnson vaccine, and the fact that it is a single-shot medicine, should position the company for more deals further down the line.
This could see the firm take vital market share from Moderna and Pfizer, especially going into 2022 and beyond, when pricing demands become more onerous, and market forces surely favor a larger and more established operation with lower margins.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.