AstraZeneca (NYSE:AZN) has long been considered a leader in the COVID-19 vaccine race. The company is developing its candidate, AZD1222, in collaboration with the University of Oxford. The drugmaker was fast out of the gate, and was one of the first to start a phase 2/3 clinical trial for its experimental vaccine back in May. AstraZeneca has also penned deals with the U.S. government and the European Union (EU) to supply millions of doses of its vaccine, pending regulatory approval.

Few companies in this race have landed such agreements, which shows that these governments also view AZD1222 as one of the most promising candidates. However, AstraZeneca just hit a bit a roadblock in its quest to bring its COVID-19 program to completion. Its paused research serves as a warning sign and important reminder to investors looking to profit from coronavirus vaccine development efforts.

Piggy bank wearing a face mask.

Image source: Getty Images.

Word travels fast 

On Sept. 8, news broke via online trade publication, STAT, that AstraZeneca's phase 3 study in the U.K. for AZD1222 had to be put on hold. The reason? One of the participants in the study suffered from a severe adverse reaction. "Standard review process triggered a pause to vaccination to allow review of safety data," according to a spokesperson for the company. 

Investors do not have a totally complete picture of the participant's medical status, but the person did display "serious neurological symptoms" following inoculation, according to STAT. Based on publicly available information, it is unknown whether AZD1222 directly caused the adverse reaction. But what little information we do have was enough to stir up a market reaction. AstraZeneca's stock dropped by about 8% in after-hours trading on Sept. 8. 

An important risk reminder

AstraZeneca's stock rebounded relatively swiftly on Sept. 9, as it became clear that the initial news of a pause wasn't as damaging to the entire program as it seemed. Matt Hancock, Health Minister of the U.K., said that the decision to halt the trial momentarily was not necessarily a setback. Given that the study features about 30,000 participants, it isn't too surprising that one of them suffered from a serious illness during the investigation. Hitting the pause button to delve into the matter further is the standard course of action during clinical trials like this one, and it is not a certain signal that there is anything wrong with the vaccine.

But this is a reminder that clinical trials are rife with potential pitfalls, and running into one of these obstacles can sink a company's stock. Note that AstraZeneca's shares are up 7.7% year to date, which isn't that much better than the 3.3% gains of the S&P 500 since the beginning of the year. Has the company's stock been boosted purely by its COVID-19 program? 

AZN Chart

AZN data by YCharts

AstraZeneca's stock has most definitely benefitted from its vaccine development, but before the pandemic, it was already a well-established pharma company with multiple products in its lineup that generated strong sales. Over the trailing-12-month period, the company racked up $25.7 billion in revenue and $2.15 billion in net income. The healthcare giant also has well over 100 programs in its pipeline. In other words, even if it fails to launch a safe and effective coronavirus vaccine, AstraZeneca will survive. By contrast, companies such as Inovio Pharmaceuticals (NASDAQ:INO) and Moderna (NASDAQ:MRNA) currently have no products on the market, and the success of their COVID-19 programs is, to a large extent, well-baked into their stock prices. 

Inovio's stock is up by 202.4% year to date, and the company boasts a market cap of $1.67 billion -- up from a measly $325.37 million on Jan. 2. These gains have been almost entirely driven by its efforts to develop a vaccine for COVID-19. Any roadblock, be it real or perceived, could send its stock crashing down. Moderna is in the same boat; the company's shares are up by 199.1% and its market cap is $23.11 billion, up from $6.47 billion on Jan. 2. Moderna's market cap seems too high for a clinical-stage biotech company, which indicates that investors are betting big that the company will benefit from its COVID-19 program. If Moderna runs into a roadblock along the way, its stock could also fall off a cliff. 

The key takeaway for coronavirus company investors

Inovio and Moderna could go on to successfully launch their respective vaccines on the market. But because of the uncertainties that plague clinical trials, and considering that neither has an approved and marketed product, both are high-risk, high-reward plays. For aggressive investors interested in either stock, it'd be best to initiate a small position and continuously monitor the progress of their coronavirus-related clinical trials. Risk-averse investors, on the other hand, will probably want to steer clear of both of these companies, and may feel that buying a few shares of a stalwart like AstraZeneca affords enough exposure to the coronavirus vaccine market without the serious possibility of the pharma stock's plummet.