Which drug would you rather take: (a) one that treats a disease after you get it, or (b) one that prevents you from getting the disease in the first place? That's an easy question. Most, if not all of us, would go with answer "b."We would rather not get the disease at all.
Should this logic apply to investing also? Maybe some of the companies that make those drugs that most of us prefer can help vaccinate our portfolios against the dreaded disease of "hugelossitis." Here are three vaccine makers that should be attractive to different types of investors.
For the dividend hunter
If you're hunting for a solid dividend with good growth potential, check out Sanofi (NYSE: SNY ) . The French drugmaker pays a forward dividend yield of 3.4% and has a five-year average yield of 3.9%. Sure, you can find pharmaceutical firms with higher yields. However, I suspect that when you peek under the covers of most of those companies you'll find more risk than you'd like.
More than 11% of Sanofi's revenue stems from sales of human vaccines. The company's pediatric vaccines that provide protection for multiple diseases -- including polio, pertussis, and Hib infections -- account for nearly one-third of all vaccine sales. Sanofi's influenza vaccines such as Fluzone also contribute significantly to the top line, with sales continuing to grow throughout the world.
Sanofi is also a leader in the animal vaccine market through its Merial animal health division. According to global animal health research firm Vetnosis, Merial stands as the top provider in the world for animal vaccines for foot-and-mouth disease, rabies, and bluetongue.
Shares of Sanofi are up 27% over the last year. The company has several solid pipeline prospects that could boost earnings, including a new vaccine for dengue in a late-stage trial. With good growth prospects and a low price-to-earnings multiple, this established vaccine maker with a nice dividend is one to consider.
For the catastrophe-expecter
Are you the type of investor who is expecting the worst at every corner? Emergent BioSolutions (NYSE: EBS ) might be just the stock for you. The company makes BioThrax, the only anthrax vaccine approved by the U.S. Food and Drug Administration. If a biological attack using anthrax occurs, this stock will probably be a better investment than gold.
As you might expect, the biggest buyer for BioThrax is the U.S. government. Sales to the Centers for Disease Control and Prevention accounted for $215.3 million of the total $215.9 million in product sales for 2012. However, Emergent is hoping to increase its international sales. The company is also pursuing expansion of BioThrax to a second indication, post-exposure prophylaxis, or PEP.
The main concern for investors looking at Emergent is that revenue and earnings have been essentially flat for the past couple of years. The stock hasn't done all that great lately, either, dropping 15% year-to-date. However, if the company succeeds in its efforts to sell more internationally, the added revenue could provide a boost to the stock. Let's hope that's the path to prosperity for the company rather than the catastrophic alternative.
For the thrill-seeker
Some investors just want to hit it big with a breakout company. If you're a thrill-seeker, take a look at Celldex Therapeutics (NASDAQ: CLDX ) . The company doesn't have a product on the market yet, but its brain tumor vaccine rindopepimut is in a late-stage clinical study.
Rindopepimut targets epidermal growth factor receptor variant III, or EGFRvIII, which is produced only in cancer cells. Around 30% of the most aggressive and frequently diagnosed form of brain cancer, known as glioblastoma multiforme, express EGFRvIII. So far, the clinical results for rindopepimut have been quite encouraging.
The market has been encouraged also, with Celldex shares soaring 140% over the past year. Analyst predict that the stock could go up another 30% within the next 12 months. Thrilling prospects, indeed.
Of course, thrill rides don't always end so well. There are considerable risks with clinical-stage biotechs. Dynavax (NASDAQ: DVAX ) is a perfect example. Things looked great for the maker of hepatitis B vaccine Heplisav until an FDA advisory panel recommended against approval of the vaccine in November because of safety concerns. Celldex isn't immune to this type of negative scenario unfolding, but the company should be a good vaccine play for the more adventurous investor.
Worth a shot
Lots of opportunities exist for investing in companies making vaccines. The Pharmaceutical Research and Manufacturers of America, or PhRMA, reported in 2012 that nearly 300 vaccines were in development. Many of those vaccines are sponsored by public companies. While there really isn't a stock that can guarantee inoculation against "hugelossitis", several of these drugmakers could be worth a shot.
You can certainly make huge gains in biotech and pharmaceuticals, but the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.