Shares of Emergent Biosolutions (EBS -3.03%) and Regeneron (REGN -0.58%) have risen sharply in 2020 thanks to potential coronavirus drugs in development, but that's where their similarities end. Is Emergent, a company with government contracts to produce vaccines for other drugmakers, a better stock to buy now than Regeneron, a biotechnology pioneer with several blockbuster drugs under its belt?

The case for Emergent Biosolutions

Over the past decade, Emergent Biosolutions has become the U.S. government's favorite contractor for infectious disease catastrophe preparation services. Instead of stockpiling vaccines for anthrax and other dangerous pathogens we're unlikely to encounter, the company's been tapped to help prepare for the COVID-19 threat that's already emerged.

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In a matter of months, more than a dozen SARS-CoV-2 vaccine programs have begun clinical-stage trials. It's too early to venture a guess on which is the safest and most effective, but we know Emergent Biosolutions will be busier than ever as a manufacturer of several promising coronavirus vaccine candidates. 

In June, Emergent Biosolutions signed an agreement with AstraZeneca (AZN -1.48%) to provide contract development and manufacturing services through 2020. AstraZeneca's candidate, AZD1222, is a fairly complex vaccine that uses a non-replicating adenovirus to deliver genetic blueprints that healthy cells can use to produce harmless copies of the novel coronavirus' spike protein.

While there's a reasonable chance that AZD1222 can successfully train human immune systems to recognize and destroy SARS-CoV-2 before it sets up shop, Emergent will still get paid heaps to produce the complex vaccine candidate if it fails in late-stage trials. That's because AZD1222 is one of the candidates supported by Operation Warp Speed, and part of this initiative involves mass production of promising candidates ahead of their pivotal trial readouts.

Emergent has signed contracts to help develop and manufacture SARS-CoV-2 vaccine candidates for Johnson & Johnson, Novavax, and Vaxart. If AZD1222 or any other vaccine candidate Emergent has been hired to manufacture crosses the 50% protection threshold set by the FDA, the company could see an enormous revenue bump.

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The case for Regeneron

This biotechnology giant is famous for developing therapeutic antibodies that prevent blindness and treat eczema. In 2018, the company turned its attention to infectious disease treatment with an antiviral candidate that significantly lowered the rate of mortality for patients infected with the Ebola virus. 

In June, the company began treating COVID-19 patients with a combination of antibodies developed using the same techniques as its successful Ebola virus candidate, REGN-COV2. Investigators have treated hospitalized and non-hospitalized patients with the antiviral cocktail to see how well it can clear infections at different stages.

The company's also testing REGN-COV2 as a short-term prophylactic to prevent infection among high-risk groups such as healthcare workers, and groups of people at even higher risk because they live with people who tested positive for COVID-19. 

Lots of companies are developing potential coronavirus vaccines and treatments, but the vast majority will fizzle out in mid- to late-stage clinical trials. Regeneron's recent success with the Ebola virus, plus its history of selecting new drug candidates that go the distance, make REGN-COV2 a relatively safe bet.

During the first quarter, Sanofi (SNY -0.44%) sent Regeneron a share of profits from sales of Dupixent, Praluent, and Kevzara that reached an annualized $683 million. Combined sales of these three treatments rose a whopping 111% year over year, and they'll probably continue growing at a rapid pace long after coronavirus vaccine production begins tapering off. 

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The better buy

Shares of Emergent or Regeneron would make a fine addition to most portfolios, and the better buy now depends on your risk tolerance. Government contracts have allowed Emergent to produce positive cash flows that could explode higher, but anything less than ultra-high-volume vaccine production could disappoint investors and deflate the stock.

The high-margin royalty streams Regeneron will receive from its collaboration partners means investors can quite reasonably expect rapidly growing profits for years to come. That makes Regeneron the better stock to buy unless you're willing to accept the extra risk Emergent presents.