Two very different companies have been in the spotlight this year thanks to their coronavirus programs. Moderna (MRNA 1.73%) ranks as one of the leaders in the race to develop a coronavirus vaccine. Gilead Sciences (GILD 0.08%) developed remdesivir, which has quickly become a de facto standard of care in treating hospitalized patients with COVID-19.
Moderna has trounced Gilead so far in 2020 in terms of stock performance, although Gilead's challenges have been unrelated to its coronavirus programs. Which of these two biotech stocks is the better pick right now?
The case for Moderna
Probably the strongest argument for buying Moderna is that its growth opportunities should be enormous if its messenger RNA (mRNA) technology proves successful. Moderna's approach is to modify mRNA so that a desired protein will be produced when the mRNA is injected into cells.
We should know soon if this approach works with Moderna's lead candidate, coronavirus vaccine mRNA-1273. CEO Stephane Bancel recently stated that the company expects to have enough safety data to submit for emergency use authorization from the Food and Drug Administration by Nov. 25, 2020.
Assuming that mRNA-1273 wins EUA, Moderna's revenue will skyrocket. The biotech signed an agreement with the U.S. government to supply 100 million doses of its coronavirus vaccine for $1.525 billion with an option to add another 400 million doses. It struck a deal with the Canadian government to supply 20 million doses for an undisclosed amount with an option to add 36 million additional doses. Moderna is also in advanced discussions with the European Commission to supply 80 million doses of mRNA-1273.
The company's pipeline prospects should improve significantly if mRNA-1273 is found to be both safe and effective. Moderna is currently evaluating five other mRNA-based virus vaccine candidates in clinical studies. The chances that those vaccines will be successful should increase if all goes well with the biotech's coronavirus vaccine.
Moderna hasn't limited its sights to just vaccines targeting viruses. The biotech's pipeline also includes seven other clinical-stage mRNA programs, with five of those candidates targeting various types of cancer.
The case for Gilead Sciences
Gilead Sciences looks for remdesivir (marketed under the brand name Veklury) to become a blockbuster success in its first seven months on the market. The big biotech hopes to expand the potential market for the antiviral drug with a clinical study evaluating an inhaled version of remdesivir.
While remdesivir will undoubtedly boost Gilead's fortunes, the biggest draw for the company is still its HIV franchise. In the first half of 2020, Gilead's HIV franchise generated $8.1 billion in sales -- roughly 77% of total revenue.
Biktarvy is the brightest star in Gilead's HIV lineup right now. That could change down the road, though. Gilead is evaluating long-acting candidate lenacapavir in late-stage testing for heavily treatment-experienced patients with HIV. It also has several candidates in phase 1 and phase 2 testing that could potentially cure HIV.
Gilead has also become a major player in oncology thanks to several key acquisitions in recent years. Yescarta is a leading chimeric antigen receptor T-cell cancer therapy. The biotech also has nearly two dozen clinical-stage programs targeting various types of cancer. Gilead will strengthen its oncology lineup and pipeline even more when its pending acquisition of Immunomedics closes.
There are other potential reasons to consider buying Gilead, including its fibrotic disease and inflammatory disease programs. Perhaps the most compelling of these, though, is the company's dividend, which currently yields around 4.5%.
Gilead Sciences is already highly profitable and has multiple blockbuster drugs on the market. It's in a much stronger financial position than Moderna. Does that make Gilead the better pick? For investors averse to taking on risk, maybe so. However, I prefer Moderna at this point.
My concern with Gilead is that it's not on a clear path to deliver strong growth over the next few years. The company experienced a major setback earlier this year after the FDA rejected filgotinib, its rheumatoid arthritis treatment, and wanted more safety data about the drug. It remains to be seen how successful Gilead's other pipeline candidates will be. While sales for Biktarvy and Descovy are rising, it's a totally different story for Gilead's other HIV drugs.
Meanwhile, Moderna seems poised for success with mRNA-1273. If so, it should increase investors' optimism about the rest of the biotech's pipeline. When there's optimism about a company's prospects, its stock tends to move higher.
I think it's possible that Gilead Sciences will eventually return to its winning ways. For now, though, my view is that Moderna has better growth prospects despite its higher risk level.