After what feels like an eternity -- though it has actually occurred with unprecedented speed -- the first competitors are crossing the finish line in the coronavirus vaccine race. COVID-19 has taken at least 1.63 million lives globally, and with the steep surge in new cases over the past few months, it will continue to wreak havoc for quite some time.
Effective, safe, widely distributed vaccines will be key to ending the crisis. And the companies that ultimately supply these vaccines could reap huge rewards. Naturally, investors are keeping a close eye on the two leading players at the moment -- Pfizer (PFE -5.12%) and Moderna (MRNA 2.74%). Both companies' messenger RNA (mRNA) COVID-19 vaccines have shown impressive efficacy rates in large-scale clinical trials, though Moderna's vaccine, mRNA-1273, was slightly lower at 94.1% than Pfizer's vaccine, BNT162b2, which achieved 95% efficacy.
The U.K. became the first country to approve BNT162b2 for emergency use on Dec. 2, followed by Bahrain and Canada. And on Dec. 11, BNT162b2 -- which Pfizer developed in partnership with Germany-based BioNTech (BNTX -1.01%) -- became the first COVID-19 vaccine to receive emergency use authorization (EUA) from the U.S. Food and Drug Administration. While that's not the same as formal approval, the authorization does allow the treatment's immediate use in the U.S. -- and people are already being inoculated.
The FDA has given Pfizer's coronavirus vaccine a much-needed vote of confidence. But does that mean Pfizer's stock is a good coronavirus bet now?
Pfizer's coronavirus vaccine is being distributed -- but what's next?
During the Phase 1a rollout of the Pfizer vaccine, healthcare personnel treating COVID-19 patients, and residents and staff at nursing homes and other long-term care facilities are first in line for inoculation.
In the meantime, the company will continue to gather data from its ongoing clinical trial in support of its submissions for full regulatory approval in 2021. Pfizer also has deals with the U.K. and Japan to supply 30 million doses and 120 million doses, respectively, and 200 million to the EU. The U.S. government has already contracted with Pfizer for a supply of 100 million doses of the vaccine for $1.95 billion -- a contract that could be expanded by another 500 million doses. Globally, the companies expect to produce 50 million doses in 2020 and up to 1.3 billion doses by the end of 2021.
The chief challenge for Pfizer's vaccine is mostly logistical: BNT162b2 needs to be transported and stored at minus 94 degrees Fahrenheit to remain stable for longer than five days. Most healthcare facilities don't possess freezers capable of supplying that ultra-cold temperature, and which could limit the market for Pfizer's vaccine over time. Meanwhile, Moderna's vaccine candidate can be stored at temperatures achievable with normal refrigerators. That difference could ultimately result in Pfizer's vaccine taking a back seat.
But for now, emergency regulatory approvals are benefiting Pfizer's stock -- which is up by about 1% so far this year and 7.8% over the past three months. Meanwhile, the much-smaller Moderna has skyrocketed by 619% year to date.
Moderna will likely come in a close second place to Pfizer in terms of emergency authorization. An advisory panel voted unanimously that Moderna's mRNA-1273 should receive formal EUA on Thursday, Dec. 17; we can expect that authorization sometime weekend. Currently, Moderna has a deal to supply around 390 million doses of its potential vaccine globally. Once it receives an EUA, the U.S. Government has ordered 200 million doses with an option for an additional 300 million doses.
What's the verdict?
Pfizer's stock looks tempting today considering the rapid progress it made in bringing a safe and efficacious vaccine to market. However, keep in mind that the COVID-19 vaccine market could wind up flooded with product offerings. In addition to those discussed here, there are 41 companies and partnerships developing potential coronavirus vaccines.
Moreover, the Pfizer vaccine's future rests on a genetic technology platform that has never commercialized yet -- messenger RNA. In traditional vaccines, a small amount of the virus is injected to trigger the body to produce an immune response to the proteins the virus produces. However, mRNA uses a different method. These act as instructors for our cells to stir an immune response by translating DNA into proteins and produce the virus's proteins.
Even though Pfizer has an early mover advantage, demand for BNT162b2 could shrink in a year or two. And its cold-chain requirements will give rivals an opening to take market share once total supply begins to exceed demand. Based on all of this, I expect Pfizer's vaccine could generate significant revenue for a maximum of a year or two -- making the stock a risky bet on the coronavirus vaccine argument alone.
With that said, Pfizer is already a well-diversified pharmaceutical company, with strong revenues from its core businesses and a catalogue of approved drugs with growing sales. Its major sellers include breast cancer drug Ibrance, arthritis treatment Xeljanz, and Eliquis, which treats blood clots and strokes.
An added perk -- Pfizer is also a dividend stock that at current share prices yields 4%, much higher than the S&P 500's past-decade average of about 2%. This pharma giant's strong sustainable diversified business and growth strategies are what make it a better choice for buy-and-hold investors, even if its coronavirus vaccine efforts are what have driven the business into the market spotlight.