As of Monday, there had been more than 47 million total confirmed cases of COVID-19 around the world, and the coronavirus had killed more than 1.2 million people. With new daily case numbers surging once more to record highs, the U.K., France, and Germany (among other nations) are re-instituting lockdowns. Meanwhile, in the U.S., the daily number of new COVID-19 cases hit a new all-time high of 99,476 on Friday.
Based on the return of the Nasdaq 100 to correction territory (defined as a 10% percent decline from its peak), investors are apparently anxious about the direction the COVID-19 pandemic has taken over the past couple of months. However, the market's negativity does offer some excellent opportunities to invest strategically in coronavirus stocks.
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Regeneron looks strong in the COVID-19 treatment niche
Regeneron Pharmaceuticals (REGN 0.27%) gained positive attention when it announced phase 2/3 data on its antibody cocktail REGN-COV2 as a treatment for COVID-19. In the study, patients with pre-existing conditions or who were immunocompromised saw a 72% reduction in medical visits when given REGN-COV2 after testing positive for COVID-19. The difference was highly statistically significant compared to placebo. President Trump received the antibody therapy as part of his COVID-19 treatment.
In October, Regeneron has requested an emergency use authorization from the U.S. Food and Drug Administration (FDA) for its antibody cocktail. So far, the U.S. government has awarded Regeneron $450 million for 300,000 doses of the product. But demand for the treatment is at the moment outpacing the company's ability to supply it.
Additionally, the coronavirus treatment market may be bigger than anyone anticipated if reinfection becomes a widespread issue. If the protective antibodies generated by infected individuals or in those inoculated with COVID-19 vaccines fade quickly or do not protect against mutated strains of SARS-CoV-2, then one can anticipate a fresh surge in demand for effective COVID-19 treatments. At a price of approximately $1,500 per dose, Regeneron could generate $1.5 billion in revenue for every 1 million doses of REGN-COV2 it provides.
Right now, Regeneron is trading for 8 times sales and 22 times earnings, which is not a bad premium considering its revenue growth of 23% year over year. For biotech investors looking to add COVID-19 treatment developers to their portfolios, Regeneron is a top pick.
Why Johnson & Johnson is worth watching
Johnson & Johnson (JNJ -1.05%) is a formidable competitor in the coronavirus vaccine race thanks to two unusual qualities of its candidate, JNJ-78436735: Studies have shown its effectiveness in a single dose, and it can be stored for months at temperatures attainable by a normal home refrigerator's freezer (about 17 degrees to 28 degrees Fahrenheit). By contrast, Pfizer (PFE -0.47%), one of the current front-runners in the race, is developing a COVID-19 vaccine that requires two doses and must be transported at minus-94 degrees Fahrenheit, which will present major logistical challenges when it comes to distribution.
Considering that in normal times, approximately half of all vaccine doses worldwide go to waste due to improper temperature control and storage issues, Johnson & Johnson's COVID-19 candidate has a real edge due to its greater robustness. The experimental vaccine is currently in phase 3 clinical trials, and while the study was paused following a volunteer's unexplained illness on Oct. 12, Johnson & Johnson said last week that investigators had found no evidence that its treatment was behind the illness and that it was preparing to resume the trial.
The company expects to produce 1 billion doses of its coronavirus vaccine in 2021, contingent on regulatory approval. While management says it doesn't wish to profit from the pandemic, it may nonetheless end up generating a great deal of cash flow. At $10 per dose, that's more than $10 billion in revenue potential next year alone -- a solid addition to the company's already formidable sales, which for 2020 are forecast to be nearly $81 billion.
Since the beginning of the year, the company has won more than $456 million in government grants to develop its experimental vaccine. In addition, Johnson & Johnson has secured orders for more than 500 million doses of its vaccine candidate. But even beyond that revenue catalyst, I'd recommend investors check out other areas of the company's portfolio.
Johnson & Johnson has a similar valuation to Regeneron, trading at 4.5 times sales and 21.6 times earnings. However, it also has a great dividend that currently yields 3% (above the S&P 500's average of about 2%). Considering its multibillion-dollar COVID-19 vaccine opportunity, Johnson & Johnson is an outstanding coronavirus stock.
