PaySpace Magazine Analyst
Companies dealing with medicine production have always been attractive to any investor’s portfolio. After all, illnesses and diseases pose a constant threat to humanity. At the same time, the healthcare industry is rapidly evolving, bringing us longevity unimaginable in the early twentieth century. Moreover, the development of new biotechnologies promises to bring people even longer life expectancy and better health conditions.
Though constantly meeting new deadly infectious diseases, the pharmaceutical industry manages to respond quite quickly and efficiently (if the clinical trials are adequately supported). However, some people prefer not to invest in the “big pharma” claiming they are selling too many placebos with unproven efficacy or even suspecting them in global conspiracies. This controversy has become especially acute during the pandemic. And yet, most people have doubts about investing in drug companies that have nothing to do with ethics. How profitable are such investments and what financial potential do they have? That’s the main investors’ concern.
PaySpace Magazine Global will provide you with some calculations and facts helping to determine if you should buy shares of the pharmaceutical companies. In particular, we’ll concentrate on those developing COVID-19 vaccines.
Considering the gravity of the pandemic situation, it’s only natural that the shares of vaccine front-runners experienced a great upsurge last year.
Thus, Moderna’s stock price surged over 10% after the news about successful clinical trials. Compared to 2019, the stock price skyrocketed over 370%. Pfizer’s share price jumped nearly 8% in mid-November, whereas BioNTech’s incredible performance of $104.75 per share at the time meant a 401.54% increase over 1 year. Johnson & Johnson stock even reached its all-time high of $157.38 on December 31, 2020. It rose by 7.41% over a year. Moreover, Novavax had its shares skyrocketing by more than 2,700% since the company started developing a COVID-19 vaccine candidate. After the announced efficiency results, the company’s shares spiked up to over $280. That was truly impressive compared to the $4 average of 2019.
At the same time, we saw negative trends for the vaccine makers as well. For instance, AstraZeneca’s stock dropped in November after the impressive data releases from Pfizer and Moderna to reach $55.30. This number signified a troubling 1.76% fall within 5 days. The more competitive the vaccine market becomes, the less likely a single company is to stand out in that crowded space.
In 2021, mass vaccination is already rolling out across the globe. Contracts are signed, the first results are much anticipated. What happens to the pharmaceutical shares?
Overall, the tendencies are quite positive. Dow Jones U.S. Pharmaceuticals Index is up 8.26% a year. NYSE Arca Pharmaceutical Index shows similar results with a 6.85% growth over a year. In addition, S&P Pharmaceuticals Select Industry Index illustrates 19.78% of 1-year returns.
When it comes to vaccine front-runners, the average growth of their shares is impressive 890% over 1 year. The average gains over the last 3 months are much more modest – 59%. At the same time, the last 5 days brought some decrease to all the companies involved in the vaccine-making process. The average decline is about 4%. Although the main trend is clear, individual results are very different.
- Moderna is trading at $175. Its performance has improved by 853% over 1 year but has fallen by 3,6% during the last 5 days.
- Pfizer’s shares are sold for $34,5. The changes within both 1 year and 5-day periods are insignificant: 2,74% and 1,34% respectively. Moreover, the stock has exhibited a price decrease of about 4% for the last 3 months.
- BioNTech stays strong with $110 per share. It shows 248% growth over a year, but the shares have fallen by 4% within the last 5 days.
- Johnson & Johnson stock is trading at $165 now. It’s grown about 10% over a year and has remained pretty stable for the last month.
- As for Novavax, its current price of $292 illustrates a stunning growth of 3,336% over a year and 206% over the last 3 months. During the 5-day period, it has fallen by 8,4% though.
Analysis & forecast
As you can see, the pharmaceutical industry is growing steadily. It’s quite a safe bet for investors now. Naturally, the most profitable companies today are those delivering the COVID-19 vaccines. Their shareholders have got impressive gains last year. The demand of investors peaked every time vaccine candidates proved to be effective in different experimental settings. These stocks still continue to grow, but at a more reasonable rate than immediately after the announced clinical trial results.
Moreover, this week the vaccine-makers saw a little decline in their stock price. This may be attributed to yet new COVID-19 strains discovered. As vaccination started in various countries, it appeared not all the vaccines are equally efficient against different virus types. For instance, South Africa postponed vaccination with previously arranged Oxford-AstraZeneca shots after some disappointing results. Now, the country is testing the Johnson & Johnson vaccine and nobody knows how it would turn out. The same situations appear in different corners of the world. This fact questions the expected profitability of the companies involved, scaring investors away.
Nevertheless, investing in vaccine-makers remains very promising. The total market for coronavirus-related treatments and vaccines is expected to reach almost $50 billion. Pfizer alone expects to sell about $15 billion in coronavirus vaccine doses this year. In addition, such an industry giant like Johnson & Johnson is considered a good long-term investment notwithstanding the current vaccination outcome.
The intensive dynamics of changes in vaccination plans and uncertainty about efficiency results doesn’t allow any accurate forecasts. Therefore, investors in the pharmaceutical industry should be very attentive to vaccination news.
Judging from the current situation, the shares of Johnson & Johnson, BioNTech, Pfizer, and Moderna will remain popular, as their vaccines are approved for use in the US, UK, and Europe. These companies have already witnessed most of the expected growth, but we believe another surge may appear throughout the year if the numbers of infected people start declining in course of mass inoculations.
Companies in the middle of clinical trials such as Novavax also have a great potential for investors. You can use a vaccine tracker to find out more about the pharma and biotech businesses behind the development of alternative vaccine candidates. Investing in those early may bring significant profits if the vaccine turns out successful. Of course, such investments are also risky, since there’s no guarantee they can beat the front-runners in such a competitive market.
Therefore, we advise diversifying your portfolio with a few drug companies involved in vaccine-making. It should be done now as the mass inoculation process is at the starting phase. We predict that the share price will go down along with the reduced need for vaccine supplies. Perhaps, that won’t happen in 2021 just yet, but surely the majority of people would get some kind of immune response to this virus by 2022. To receive the most profit, you should sell the respective shares before the pandemic ends.