With more than 13 million cases of COVID-19 around the globe and the number continuing to climb, there's plenty of incentive for healthcare companies to try to develop a treatment or a vaccine to stop the spread of the disease. But developing a vaccine takes time, and investors run the risk of getting too excited about studies that are far from conclusive. One way to avoid doing that is by focusing on one key figure in any study results: the number of participants.

Why a study's size is so important to consider

When companies develop drugs, they go through four stages of clinical trials. In the first phase, a study may include fewer than 100 people, but if the drug is successful and makes it to phase 4, the number of subjects is likely to reach several thousand.

Bottle labeled as a "coronavirus vaccine."

Image source: Getty Images.

The purpose is to get a diverse group of people using the drug to determine not only how effective it is but also how safe it is. According to the U.S. Food and Drug Administration (FDA), 70% of drugs survive phase 1, in which there's the fewest number of participants in a study. But as the number of participants increases, the success rate declines. That's because larger studies will include a greater cross-section of the population, and there will be more potential issues that arise than in a small study where the scope is much more limited.

Unfortunately, investors appear to be ignoring this number

One stock that's been surging this year is Moderna (MRNA 0.02%). Shares of the biotech company are up more than 300% year to date, and it's been among the top stocks on the markets this year. The S&P 500, meanwhile, is about where it was at the start of the year. Much of Moderna's success can be attributed to its work on a coronavirus vaccine. 

On July 14, the company released a preliminary report on a phase 1 study on 45 people. The results were promising, indicating that patients produced neutralizing antibodies that could help them build immunity against SARS-CoV-2, the virus that causes COVID-19. And while the drug didn't cause any serious side effects in patients, more than half of the people who took the drug reported mild or moderate ones. With a larger sample size, there may be more issues that arise.

Nonetheless, investors were focused on the positives, and the stock rose the next day by as much as 17%. Even with Moderna's stock trading at all-time highs and investors now paying around 500 times the revenue that the company's generated just to own a piece of it, there's still plenty of bullishness left.

The big test for Moderna's vaccine is yet to come as the company will be launching a much larger (30,000 participants) phase 3 study on July 27. Those results will be much more important and useful when assessing just how effective the company's vaccine is on a wide scale. A strong showing from that study could send Moderna's stock soaring even higher. However, an underwhelming result could send it crashing down, and therein lies the risk with becoming too bullish too early on small-scale studies: Subsequent studies could negate earlier signs of progress.

Pfizer (PFE 0.62%) also released positive results from a study relating to its potential coronavirus vaccine earlier this month. The drugmaker, which is working with German biotech BioNTech (BNTX -0.82%) on the project, released the results of the study on July 1. It involved 45 patients and, as in the Moderna study, it found that the vaccine produced antibodies in patients that could help prevent them from contracting COVID-19. Another similarity was that the study wasn't symptom-free, as more than half of patients reported issues after a second injection, although none of the side effects appeared to be serious.

So far in July, shares of Pfizer are up more than 9%, while the S&P 500 is up 4%. This outperformance is likely thanks to the test results, given that this has been the main development for the company in the past few weeks. 

Investors should be careful when investing in vaccine stocks

There's plenty of reason to be optimistic if a company's making progress in developing a COVID-19 vaccine -- there's need for it all over the world. Some analysts are estimating that if Moderna's vaccine is successful, it could generate $5 billion in revenue in just a few years. That's not bad for the Massachusetts-based company, which reported just $60 million in revenue in 2019.

But until results on a much wider scale are available, the stock's just too risky an investment right now. Its astronomical price today suggests that investors are expecting the vaccine to be successful. And if it isn't, investors who are holding the stock today could incur significant losses.

A safer option could be investing in an established company like Pfizer that's a decent buy beyond its coronavirus vaccine candidate. Trading at just 4 times sales and 12 times earnings, the New York-based company's a safer bet. A $5 billion bump in sales would to mean a lot more for Moderna than it would for Pfizer, which generated $51.8 billion in revenue last year.

Year to date, shares of Pfizer are down 9%.

It may be less exciting, but investing in healthcare companies with strong businesses in place like Pfizer is a much safer route to take than speculating on a company like Moderna. With the latter, you're essentially betting on the success of its vaccine -- which, at this stage in the process, is still too early to determine.