Big pharmaceutical companies and small biotechs alike have jumped into the race to develop treatments and vaccines for the novel coronavirus disease COVID-19. Pfizer (PFE 2.40%) ranks as one of the biggest of the big pharma companies and has several COVID-19 efforts under way. Moderna (MRNA -0.58%) stands as a leader among the small biotechs scrambling to develop a coronavirus vaccine.

Moderna has been the undisputed winner between these two stocks so far in 2020. But which of these coronavirus-focused stocks is the better pick for long-term investors?

COVID-19 vaccine vial leaning on a tiny toy house with a healthcare professional blurred in the background

Image source: Getty Images.

The case for Moderna

In March, Moderna became the first drugmaker with an experimental COVID-19 vaccine to begin clinical testing in humans in the U.S. The National Institutes of Health (NIH) initiated a phase 1 clinical trial evaluating Moderna's messenger RNA (mRNA) vaccine mRNA-1273 in 45 healthy adults.  

Moderna is preparing to conduct a phase 2 study of mRNA-1273 on its own that will build on the data gathered in the NIH-led phase 1 study. In the meantime, the company is making plans to ramp up its manufacturing capabilities to produce millions of doses of the COVID-19 vaccine should clinical testing go well. 

This first-mover status in developing a COVID-19 vaccine has gained widespread attention for Moderna. However, the biotech has other promising pipeline candidates as well. 

Its lead candidate, mRNA-1647, is an experimental mRNA vaccine targeting cytomegalovirus (CMV). Moderna recently completed enrollment in a phase 2 study for the vaccine. It hopes to report interim results from the study in the third quarter of 2020. The COVID-19 outbreak could present problems for Moderna's progress, though. The company anticipates that some study participants might not be able to receive their next vaccine dose on schedule and perhaps not at all because of the coronavirus pandemic.

The COVID-19 crisis is having an even bigger impact on Moderna's other clinical efforts. The biotech has paused enrollment in early stage studies for rare-disease candidates mRNA-3704 and mRNA-3927 and pediatric respiratory vaccine mRNA--1653, and the testing site for its chikungunya virus vaccine mRNA-1944 has paused enrollment as well.

Still, for a small biotech, Moderna has a robust pipeline. It also boasts a strong financial position with around $1.77 billion in cash and investments as of Feb. 29, 2020, plus access to grant funding that boosts its available capital to $1.95 billion. That's enough to fund operations for several years.

With its market cap below $11 billion, any success for Moderna's candidates -- and especially its COVID-19 vaccine -- would almost certainly send this high-flying biotech stock even higher.

The case for Pfizer

Pfizer (PFE 2.40%) is battling COVID-19 on multiple fronts. The big drugmaker is conducting preclinical testing of a lead antiviral candidate and hopes to advance to clinical testing in Q3. It's exploring the potential for anti-inflammatory drug Xeljanz to be used in treating patients with COVID-19-related pneumonia.

The company is also involved in developing a potential coronavirus vaccine. Pfizer announced in March that it's teaming up with BioNTech on development of the small drugmaker's experimental mRNA vaccine for immunizing against the novel coronavirus. The two companies expect to begin clinical testing in humans by the end of April.

Obviously, a company as large as Pfizer has a lot more going on than just its coronavirus efforts. One of the most important upcoming developments for Pfizer is its planned merger of Upjohn with Mylan (MYL) into a new entity to be named Viatris.

Pfizer's growth hasn't been much to get excited about recently due to primarily to the loss of patent exclusivity for Lyrica. But the Upjohn-Mylan deal will remove the drag that Lyrica and several other older drugs are having on Pfizer, leaving the company with several solid growth drivers, notably including blood thinner Eliquis, breast cancer drug Ibrance, and rare disease drug Vyndaquel.

This transaction was originally scheduled to close in the first half of 2020. However, the COVID-19 crisis has caused Pfizer to delay the finalization of the deal until the second half of the year. Even with a later-than-expected timeline, though, Pfizer's growth story should improve in the near future.

Meanwhile, Pfizer continues to enjoy a strong financial position. It generated a whopping $51.8 billion in revenue last year with adjusted earnings totaling $16.7 billion. The company's cash stockpile, including cash, cash equivalents, and short-term investments, totaled more than $9.8 billion at the end of 2019.

Pfizer's dividend yield stands at close to 4.3%. Although the dividend will be reduced with the Upjohn-Mylan transaction, Pfizer shareholders will receive shares of the new company to be formed, Viatris. The combination of the dividend that Viatris is expected to pay with the "new" Pfizer's dividend should be in line with Pfizer's current dividend.

Better pick

Aggressive investors could lean toward Moderna since it has more room to run if its pipeline candidates are successful. However, that's a big if for now. My view is that Pfizer is the better pick.

Pfizer is certainly stronger from a financial standpoint. It's positioned to grow at an attractive level for a big drugmaker once the Upjohn-Mylan deal closes. And with shares trading at only 12.5 times expected earnings, Pfizer's valuation looks attractive. 

I wouldn't necessarily go with Pfizer merely because of its COVID-19 programs. But the overall picture for this big pharma stock appears to be pretty good.