Clinical-stage biotechs including Moderna (MRNA -1.75%) and Novavax (NVAX -0.47%) and big-pharma players such as Pfizer (PFE -1.82%) and AstraZeneca (AZN -0.75%) are sharing the spotlight in the coronavirus vaccine race. Between them, these companies have won billions of dollars in U.S. government funding for their programs, which are nearing the finish line.

But share-price gains for the biotech companies have largely surpassed those of their pharmaceutical rivals. Since the start of the year, for example, Moderna and Novavax are up 261% and 2,612%, respectively. During the same period, Pfizer is down 7.7% and AstraZeneca is up 11%. On the surface, it seems buying biotech stocks instead of pharmaceutical companies is a winning strategy. But it isn't as simple as that. Let's take a closer look to see where you should put your money in this race.

An investor presses the "buy" button on a keyboard.

Image source: Getty Images.

Scoring two victories

First of all, it's clear that a clinical-stage biotech company has more potential for share movement on coronavirus news. It doesn't have other products on the market, so if it wins the vaccine race, it scores two victories: It gets a product out there, and that product is one that's desperately needed in countries around the world. The market value of clinical-stage biotechs also allows more room for gains. For example, Moderna's market capitalization is $27 billion, while Pfizer's is $200 billion.

MRNA Market Cap Chart

MRNA Market Cap data by YCharts

But with this potential for great gains comes the potential for great losses. Any setback may be severely punished, because these companies' near-term prospects rely so heavily on their coronavirus programs. Clinical-stage biotech Inovio Pharmaceuticals (INO -6.21%) sank by 33% over two trading sessions after the U.S. Food and Drug Administration (FDA) said it needed more information before the company could proceed with its vaccine candidate's phase 2/3 trial. Meanwhile, when AstraZeneca's U.K. trial was temporarily halted due to the unexplained illness of a participant, the shares slipped by less than 2%. So, while big pharma companies haven't soared on good news, they haven't fallen much on bad news either. And over time, AstraZeneca and Pfizer have registered positive stock performance.

PFE Chart

PFE data by YCharts

Taking the risk

Now, you might say: Well, the only way to invest and gain is to take the risk and buy clinical-stage biotech companies. My response is: Not necessarily. If a big-pharma player brings a coronavirus vaccine to market, the stock may not surge like that of a biotech. But over time, vaccine sales will add to revenue and profit. And that, along with sales of other products, could support steady share-price increases over the long term.

So, what's an investor to do? It depends on your style. If you're an aggressive investor with risk tolerance, you can consider buying dynamic biotech players that might offer major gains in a very short period of time. Those gains could extend to the long term if the company brings a vaccine, and eventually other products, to market.

Investors with a bit less risk tolerance may want to take a small position in one of these clinical-stage players and a larger position in a solid big-pharma company. That brings you some potential for a big increase -- but if it turns out to be a big decrease, your losses will be limited. And long-term gains from the pharmaceutical investment may compensate somewhat over time.

Sticking to security

And finally, the most cautious investors should stick to the security of large pharmaceutical companies. They will generate revenue from the rest of their product portfolios regardless of the outcome of coronavirus programs.

I'm all for monitoring stock prices and related news whether your risk tolerance is high or low. But doing so is especially important if you're betting on clinical-stage biotech companies in this vaccine race. Any news, whether from the companies themselves or from regulators, could result in extreme price movements. It's best to follow the situation closely.

Clinical-stage biotechs and pharmaceutical companies both offer interesting coronavirus investment opportunities. And with the great need for a vaccine, players from both sectors may win a part of the market. That's good news for us as citizens -- and as investors.