These firms shore up vaccine profits with new innovations.
Pharmaceutical companies made household names by the COVID-19 pandemic have profited big time in the last couple of years from blockbuster vaccines, a trend that’s losing momentum as COVID-19 fears wane. But some analysts believe these stocks are being overly penalized by pessimism about their prospects for new vaccine and drug development. Not to mention that President Joe Biden’s administration is readying the U.S. for a fall and winter wave of COVID-19 infections, shifting $10 billion from testing and equipment programs to vaccine efforts. Meanwhile, messenger RNA, or mRNA, research and other advances are opening the door for new vaccines against influenza, pneumonia, human immunodeficiency virus (HIV), monkeypox and cancer. The biggest firms are sitting on plenty of dry powder from vaccine profits to deploy into new ventures. In an inflationary climate, health care stocks in general look promising as a place to find returns in the second half of 2022. Here are eight of the best vaccine stocks to put on your watch list.
Moderna Inc. (ticker: MRNA)
Moderna saw huge success with its mRNA COVID-19 vaccine rollout of Spikevax in 2021, and this industrious pharmaceutical manufacturer still has solid quarterly vaccine sales for now. But it has also been busy churning out more innovations. The pharma giant said June 8 that it will seek authorization for its latest omicron booster candidate, which it found to be more effective against the BA.1 subvariant, though new subvariants are already circulating. It’s developing an HIV vaccine using mRNA technology, kicking off a clinical trial in Africa in mid-May. It also launched clinical trials of an mRNA-based influenza vaccine last year. “We see Moderna shares as undervalued, with significant potential for the firm’s mRNA technology to support further updates to COVID vaccines as well as additional respiratory virus vaccines in the near term, and a broader portfolio of mRNA-based therapeutics in the long run,” says Karen Andersen, Morningstar sector strategist.
Pfizer Inc. (PFE)
Many experts believe the U.S. is unlikely to achieve herd immunity to COVID-19, so mRNA vaccines from industry stalwart Pfizer will continue to be in demand. Pfizer and BioNTech announced in early June that their three-dose COVID-19 booster is 80% effective in children younger than 5, and the booster for kids ages 5 to 11 got regulatory approval in May. The government also has contracts with both Pfizer and Moderna to deliver additional doses of vaccines for kids, and it announced a distribution plan on June 9. But Pfizer has its fingers in many other pies. Paxlovid, its COVID-19 pill, is being distributed in pharmacies under the U.S. government’s “Test to Treat” program. Sales of Prevnar, its vaccine against pneumococcal diseases, rose 22% in the first quarter year over year, and its vaccine for Lyme disease is in phase 3 clinical trials in Maine. Pfizer’s stock is down nearly 11% year to date as of June 9, but it beat earnings estimates for the last four quarters and has a dividend yield of 3%.
Merck & Co. (MRK)
Pfizer is not the only contender in the COVID-19 pill game and prolific vaccine maker Merck is getting plenty of play for its role as the other pharma supplying the Biden administration’s “Test to Treat” initiative, with its Lagevrio treatment. Analysts on average support a “buy” recommendation for MRK stock, which is up almost 16% this year as of June 9, compared with a 16% decline in the S&P 500. It also has a 3.1% dividend yield. Merck’s 50% sales growth in the first quarter was buoyed by its blockbuster human papillomavirus vaccine Gardasil, cancer treatment Keytruda as well as its animal health business and Lagevrio. Merck’s Pneumovax 23 pneumococcal vaccine sales rose to $173 million in the first quarter, a relatively small chunk of sales overall. The company’s investigational vaccine V116 also recently received a breakthrough therapy designation from the FDA for the prevention of pneumococcal pneumonia.
Bavarian Nordic A/S (BVNRY)
The Centers for Disease Control and Prevention announced on June 3 that monkeypox may be spreading from person to person in the U.S., as some cases were not linked to recent travel in nations where the virus is found. While it’s far from emergency status, the spread of the virus has put Denmark-based Bavarian Nordic (BVNRY) in the spotlight, as it makes the only vaccine approved for use in the U.S. and Canada against monkeypox. On June 10, the U.S. Department of Health and Human Services instructed Bavarian to deliver 500,000 additional doses of its vaccine, called Jynneos, for a total of 2 million doses in the national inventory. The company meanwhile has upgraded its guidance for 2022 amid contract signings of various sizes with countries seeking to secure their supplies of the vaccine. Although the share price is down 27% for the year as of June 9, it’s jumped more than 35% in the last three months in over-the-counter trading. Investors who think monkeypox will become more of a problem this year may find this stock is a good way to make that bet.
GSK PLC (GSK)
On May 31, GSK, formerly GlaxoSmithKline, announced a $3.3 billion deal to buy pneumonia vaccine maker Affinivax, putting its ducks in a row to compete with Pfizer and Merck on that front. Still, GSK stock got just a fraction of a bump up on the news. Weighing on investor sentiment was likely the sales figures from its previous pneumonia vaccine, Synflorix, which was approved only in Europe and had flopped compared with Pfizer’s Prevnar. The company is also seeking regulatory approval of its respiratory syncytial virus vaccine for older adults, as it jockeys for position in a crowded field for RSV shots. GSK announced June 6 that the FDA has approved its new measles, mumps and rubella vaccine (MMR), Priorix, for children 12 months and older — and shares saw less than a percentage-point increase. GSK shares are flat for the year as of June 9, but the market could be underestimating GSK’s potential: Analysts on average rate GSK a “buy” now, according to Seeking Alpha’s ratings screen. Plus, it has strong early-2022 results, a wide moat and a 4.5% dividend yield going for it.
Dynavax Technologies Corp. (DVAX)
Biopharmaceutical companies like Dynavax are on the cutting edge of cancer prevention, adding to their risk as well as their intrigue for investors. A Stanford University study recently published in the journal Science Immunology found that adding DVAX’s vaccine to Dragonfly Therapeutics’ interleukin-12 drug and injecting it into cancer tumors can mobilize B cells, inducing a systemic antitumor response that helps prevent relapse. With a $1.4 billion market capitalization, Dynavax has multiple partnerships to develop iterations of COVID-19 vaccines and has a hepatitis B vaccine candidate in the works. Plenty of heavy hitters, such as Novartis AG (NVS), are backing cancer vaccine research efforts, but Dynavax has so far managed to stay ahead of the curve. Still down more than 14% year to date as of June 9, DVAX has gained about 16% in the last three months and has a price-earnings ratio of 16. Morningstar assigns a fair value estimate of $20.50 to DVAX, which closed at $12.02 on June 9.
Novavax Inc. (NVAX)
The vaccine advisory panel for the FDA on June 7 gave Novavax’s long-delayed COVID-19 vaccine the go-ahead, saying its benefits outweigh the risks, but as the week stretched on without an official FDA approval, the company’s stock took a hit. Experts believe there is a need for Novavax’s more traditional vaccine, which offers a protein-based alternative to the mRNA approach, given the vaccine hesitancy in the U.S. now. The Novavax vaccine has also received approval for use in individuals 18 and older from more than 40 other countries, plus emergency authorization from the World Health Organization. Zacks Research gives NVAX its top rating for value, growth and momentum investors, and recommends a “hold” even though the stock is down 71% for the year as of June 9. NVAX has seen significant revenue growth over the last three years, and if the FDA gives the official nod to its COVID vaccine in coming days, NVAX may be trading at a cheaper price than it deserves.
Phreesia Inc. (PHR)
Not all companies profiting from vaccines are pharmaceutical or biotech firms, of course. Health care software developer Phreesia provides a software-as-a-service, or SaaS, platform for vaccine management that streamlines messaging, check-in and follow-up procedures. Its automated patient intake management system was rated No. 1 for 2022 by KLAS Research, and should come in handy as the world adapts to a more regular schedule of vaccines of all types. Phreesia posted a loss but beat earnings-per-share estimates in its last quarterly report, a surprise of 9%, and it was the fourth consecutive quarter that Phreesia has exceeded revenue expectations. This one’s not for the faint of heart, as the stock is down 53% for the year as of June 9, but it may interest momentum investors who think COVID-19 vaccines will be integrated into routine health care.
The eight best stocks to gauge the future of vaccines:
— Moderna Inc. (MRNA)
— Pfizer Inc. (PFE)
— Merck & Co. (MRK)
— Bavarian Nordic A/S (BVNRY)
— GSK PLC (GSK)
— Dynavax Technologies Corp. (DVAX)
— Novavax Inc. (NVAX)
— Phreesia Inc. (PHR)
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