The COVID-19 pandemic launched a race among pharmaceutical and biotech companies to find a vaccine.
One source estimates the number of entrants in the race is 487.
Both governments and the private sector have allocated massive resources to this herculean task. The U.S. government alone is spending more than $2 billion on research and manufacturing of a vaccine.
The development of a COVID-19 vaccine is not a question of “if” but “when.”
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The question for investors is different but hardly much easier: How can you profit from a COVID-19 vaccine?
Today’s State of Play
A vaccine creates antibodies against a disease.
This ensures that when a vaccinated person encounters a particular infection, the immune system will know how to respond.
Traditionally, vaccines take 10 to 15 years to develop, test and obtain regulatory approval.
By today’s standards, that seems like an eternity.
Still, most experts did not expect that there could be a vaccine for COVID-19 by the end of the year.
That timetable has accelerated to an unimaginable degree.
Encouraging early-stage trial results now suggest that a vaccine before the end of 2020 is likely.
Regulators are doing their part, suggesting they will approve a vaccine as soon as September.
Some analysts suggest that Americans could start to get a vaccine well before the November election.
COVID-19 Vaccine Companies: The Front-Runners
With close to 500 entrants in the race, picking a winner is tough.
That said, below are four leading candidates.
AstraZeneca (NYSE: AZN)
U.K.-based AstraZeneca’s preliminary vaccine trial with Oxford University puts it at the head of the class. The company’s trials induced a “strong immune response within humans” and “appears to be safe.”
AstraZeneca said that it hopes to start distributing the vaccine by the end of 2020. The manufacturing of the vaccine will begin even before trials finish. The aim is to make 2 billion doses. The company has already struck deals with the U.K., France, Germany and the U.S. to do just that.
Pfizer (NYSE: PFE)
Most pharmaceutical companies are focusing on developing a traditional vaccine. This involves introducing small or inactive forms of the virus to stimulate the immune system.
Pharmaceutical giant Pfizer and Moderna (Nasdaq: MRNA), which I discuss below, are taking a different route.
In collaboration with BioNTech (Nasdaq: BNTX), Pfizer is focusing on a messenger ribonucleic acid (mRNA) vaccine.
The technology has three advantages: a quicker development timeline, delivery in lower doses, and larger, rapid production capacity.
Moderna (Nasdaq: MRNA)
Cambridge, Massachusetts-based biotech Moderna is also focusing on an mRNA vaccine.
On May 18, Moderna became the first to release positive Phase 1 clinical data on a COVID-19 vaccine trial.
The company proceeded with a Phase 2 clinical trial after eight patients in a Phase 1 safety trial developed antibodies for the virus after two doses of mRNA-1273.
Moderna suffered a setback, however, when reports indicated that current trial participants experienced adverse reactions to mRNA-1273.
Moderna’s vaccine also became the first to enter Phase 3 trials on July 27, cementing its pole position in the global vaccine race.
Johnson & Johnson (NYSE: JNJ)
Since late January, Johnson & Johnson’s Janssen unit has been working to develop a traditional preventive vaccine against COVID-19.
Johnson & Johnson is deploying massive resources to produce more than a billion doses of the vaccine.
It estimates its vaccine could be ready in early 2021.
Profit From the COVID-19 Vaccine
The development of a COVID-19 vaccine will be a monumental achievement for humanity.
Yet making money from the winning vaccine may turn out to be just as challenging.
First, today, there are no obvious winners.
The British government is one of the biggest backers of AstraZeneca. And even it is hedging its bets.
The U.K. previously agreed to buy 100 million doses of the AstraZeneca vaccine. But it has also signed additional deals to secure 90 million doses of two possible COVID-19 vaccines from Pfizer and French group Valneva.
Second, experience suggests that the COVID-19 vaccine is not a “winner takes all” market.
Any rewards will accrue to multiple firms.
Third, even if you bet on the one winner, sales and profits may fail to live up to expectations. The pharmaceutical industry will be under enormous pressure to price a COVID-19 vaccine low.
This, in turn, means that the mania surrounding the share price of stocks like Moderna may not be justified.
So what’s my advice?
Warren Buffett puts difficult investment decisions in the “too hard” pile on his desk.
I’m inclined to do the same with the COVID-19 vaccine companies. There are just too many easier ways to make money.
Nevertheless, if you want to make a bet on the COVID-19 vaccine, I recommend you don’t place it on just a single horse. Invest in a diversified portfolio of possible winners.
The COVID-19 vaccine companies I described above are an excellent place to start.