3 Companies to Bet On as the World Races For a Vaccine

On the weekend of June 20-21, a dozen states reported a spike in confirmed cases of the novel coronavirus. Along with that came a new round of polarized opinions about what the increase in cases means.

Are we on the verge of a second wave of the virus? And if it comes, will it be more problematic, and perhaps more deadly, than the first? Or is the increase in cases simply the result of an increase in testing? Did some states open too fast?

No matter where you stand on the answers to any of those questions, it’s clear that one thing that would make all of this go away is a vaccine for the novel coronavirus. If you’ve been following the markets, you know that there is no shortage of companies involved in the race for a vaccine.

In fact, over 100 companies and organizations are working on vaccine candidates to treat Covid-19. Johnson & Johnson NYSE: JNJ along with Moderna NASDAQ: MRNA, Merck NYSE: MRK, Pfizer NYSE: PFE and AstraZeneca NYSE: AZN are the five companies that the U.S. government is viewing as the most likely to be successful.

With that in mind, let’s take a look at three companies that are among the favorites to develop a vaccine for the novel coronavirus.

It’s a race to be right, not necessarily first

The Trump administration has lifted some of the regulations that slow down the vaccination development process. But even though vaccine candidates may get to the clinical trial stage faster, they still have to pass those trials. And some key deadlines are coming up.

One of those companies is Inovio NASDAQ: INO. Inovio fits into the category of a company that is currently on the outside looking in. The stock took a precipitous dip on June 3 when the company was left off of the list of five companies that were considered most likely to deliver a successful candidate.

However, investors have mostly shrugged off that bad news. INO stock has recovered virtually the entire loss from earlier this month and the stock is up approximately 350% for the year. A key thing for investors to pay attention to will be the result of the company’s results of its Phase 1 clinical trial this month. A successful approval could move Inovio off the sidelines and among the “preferred” list.

Will the company be successful? On the company’s most recent earnings call, Kate Broderick, Inovio’s Senior Vice President of Research & Development (R&D) remarked about Inovio’s long history working with coronaviruses specifically with Middle Eastern Respiratory Syndrome (MERS). According to Broderick, Inovio is the only company with a vaccine candidate against MERS that is in a Phase 2a clinical trial. 

But, Inovio is still among the riskier plays here. If you’re looking for a company that’s among the leading contenders, Johnson & Johnson (JNJ) merits serious consideration. The company recently announced it will begin a Phase 1/2a clinical trial in late July, that’s more than a month earlier than prior projections. Another reason for investors to consider J&J is its ability to get a vaccine developed at scale.

The company just signed an agreement with Emergent BioSolutions that will boost J&J’s already considerable manufacturing muscle.

Another big pharma company we’re taking a look at is Pfizer (PFE). Pfizer is partnering with BioNTech NASDAQ: BNTX to advance the company’s RNA (mRNA) vaccine candidates. Plural. And that’s one of the exciting things about Pfizer. The company is going to be one of the last to get a vaccine into human trials. However, Pfizer is not just offering one candidate; they will be testing four vaccine candidates at the same time. Each candidate will feature a different combination of the mRNA format and target antigen.

Any of these stocks has the potential to provide massive gains. But first a few notes of caution.

None of the above is an option

There are two things that investors need to be careful of. The first is to believe that there will definitely be a vaccine. The reality is that it’s entirely possible that none of these companies will be able to develop a vaccine that works.

Like HIV and AIDS, it may be the case that antiviral treatments become the short- and long-term treatment protocol for Covid-19. That remains to be seen, but that simply reinforces that you should not be looking at any of these companies simply as a vaccine play. They are all quality companies to own in their own right.

Beware of the high-flying, small-cap companies

A second caution for investors is that there are many small-cap companies that are in this race. And some of them may have an awfully attractive share price.

In the early days of the Covid-19 pandemic, many small-cap companies announced a vaccine candidate for the novel coronavirus. While it may be attractive to think you’ve found the next stock that nobody else has found, you have to take caution. Many of these companies have never had a successful vaccine come to market. And, other companies would have a difficult time delivering a vaccine at the scale that is necessary.