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Better Coronavirus Stock: AstraZeneca vs. Eli Lilly

By Keith Speights – Jul 31, 2020 at 5:48AM

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These two big drugmakers have tremendous prospects for their respective COVID-19 programs. Here's which one could be the bigger winner.

Several big pharma companies shifted into high gear soon after the novel coronavirus emerged as a serious health concern earlier this year. Some of them focused on COVID-19 vaccine development. Others focused on developing potential treatments for the viral disease. 

AstraZeneca (AZN -3.07%) is a great example of the former group, while Eli Lilly (LLY 0.19%) stands out as a top drugmaker in the latter category. For investors, Lilly has been the bigger winner so far this year. But which of these coronavirus-focused pharma stocks is the better pick now?

Scientist holding two test tubes.

Image source: Getty Images.

The case for AstraZeneca

AstraZeneca made a smart move in April by partnering with the University of Oxford, which had already developed a promising COVID-19 vaccine candidate that had entered phase 1 testing. The experimental vaccine, now known as AZD1222, ranks as one of the leaders in the race to develop a safe and effective coronavirus vaccine.

Earlier this month, AstraZeneca announced encouraging interim results for AZD1222 from a phase 1/2 study. The vaccine candidate produced neutralizing antibodies (which hold the potential to prevent infection) in all participants who received two doses. It also induced T-cell response, another important immune-system response, in all participants.

AZD1222 is now in late-stage testing. AstraZeneca has agreements in place to supply more than 2 billion doses of the vaccine to the U.K., U.S., and several non-profit organizations if it goes on to win regulatory approvals.

AstraZeneca doesn't absolutely need AZD1222 to be successful, though. The company has several drugs that continue to deliver double-digit percentage sales growth, notably including cancer drugs Imfinzi and Tagrisso.

It also claims a deep pipeline with 20 late-stage programs and over 60 programs targeting additional indications for drugs that have already been approved for other indications. AstraZeneca's promising new late-stage candidates include anemia drug roxadustat and asthma treatment tezepelumab.

Wall Street analysts project that AstraZeneca will be able to deliver average annual earnings growth of more than 19% over the next five years. This level of growth seems possible with the company's solid current lineup and strong pipeline. In addition, the drugmaker offers a dividend that currently yields around 2.5%.

The case for Eli Lilly

Eli Lilly teamed up with two smaller biotechs to develop experimental antibody therapies targeting COVID-19. In March, the big drugmaker partnered with AbCellera. In May, Lilly announced a collaboration with Junshi Biosciences.

The candidates developed through these partnerships are already moving forward. In early June, Lilly announced that the first patients had been dosed in a phase 1 study of LY-CoV555, the first antibody therapy from its collaboration with AbCellera. A week later, the first participant was dosed in a phase 1 study of Junshi's experimental antibody therapy JS016.

Lilly is evaluating Olumiant in a phase 3 study targeting hospitalized adults with COVID-19. The drug, which Lilly licensed from Incyte, is already approved in treating rheumatoid arthritis. Lilly is also testing LY3127804 in a phase 2 study for treating COVID-19 patients with pneumonia who are at a higher risk of developing acute respiratory distress syndrome (ARDS).

Meanwhile, Lilly's current product lineup continues to deliver strong results. Sales are soaring for cancer drugs Cyramza and Verzenio, diabetes drugs Jardiance and Trulicity, and immunology drugs Olumiant and Taltz.

Lilly's pipeline includes seven candidates awaiting regulatory approval, and the company also has 16 late-stage programs. Its late-stage candidates include promising pain drug tanezumab and immunology drug mirikizumab.

Analysts think that Lilly will grow its earnings by an average of close to 13.5% annually over the next five years. The company's dividend yield currently stands north of 1.8%, boosting the potential for market-beating total returns.

Better coronavirus stock

I like the prospects for both AstraZeneca and Eli Lilly. If I could only pick one of these coronavirus-focused stocks, though, it would be AstraZeneca.

My decision is based on several factors. AstraZeneca's pipeline potential appears to be greater than Lilly's. I think AZD1222 should have a good chance of obtaining regulatory approvals. AstraZeneca's dividend is more attractive than Lilly's, as well.

Smaller coronavirus stocks could be even bigger winners, but for investors looking for a great overall risk-reward profile, AstraZeneca appears to be a great pick.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Incyte. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Eli Lilly and Company Stock Quote
Eli Lilly and Company
$311.46 (0.19%) $0.59
AstraZeneca PLC Stock Quote
AstraZeneca PLC
$54.58 (-3.07%) $-1.73
Incyte Corporation Stock Quote
Incyte Corporation
$66.89 (-0.77%) $0.52

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