Don't let the ongoing vaccine rollout trick you into thinking that coronavirus stocks are old hat. Until the global caseload falls to manageable levels, we'll still need new vaccines, plenty of diagnostic tests, and as many therapeutic drugs as we can get our hands on to treat patients with COVID-19 and prevent people from contracting the disease.
The catch? Competition for market share is intensifying. So, it's a bit harder to pick a winning coronavirus stock now than it was in 2020. Being the first to get a product approved for sale clearly doesn't mean that it will capture the entire market. Investors should turn to focus on companies that will be making products that are tangibly better than the competition.
Image source: Getty Images.
1. Johnson & Johnson
While Johnson & Johnson (JNJ -0.69%) is still working on its coronavirus vaccine candidate, it has one big advantage that the vaccines by Pfizer (PFE -0.19%) and Moderna (MRNA 0.89%) don't: It only takes one dose to generate immunity. This means that it doesn't need to manufacture nearly as much to meet demand. It has the added benefit of making the logistics of vaccine administration much easier, since people will only need to report to a clinic once, and clinics will need to procure fewer syringes and associated products than with competing vaccines. But the candidate will need to clear its final phase of clinical trials and get regulatory approval before investors can count on the payoff.
J&J's vaccine will have another advantage over the competition: better storage and transportation characteristics. While Pfizer's vaccine requires transport and storage in ultra-cold freezers, J&J's can be stored at standard medical refrigerator temperatures for up to 90 days. In such a refrigerator, Pfizer's vaccine can only stay for five days before spoiling. That means J&J's candidate is easier for smaller clinics to deploy, which is likely to be a major factor in their purchasing decision. The caveat here is that everything I've said assumes that the candidate is just as effective as the others on the market. If it isn't as good at preventing severe disease, it'll be at a major disadvantage.
2. Abbott Laboratories
Abbott Laboratories (ABT -0.65%) isn't working on a vaccine, but its diagnostic tests make it a lucrative coronavirus stock. As a result of its strong leadership in testing throughout the pandemic, Abbott's U.S.-based diagnostics sales revenue increased by 61.4% in the third quarter compared to last year. In total, the company has eight different tests that are approved for sale, covering every conceivable coronavirus diagnostic niche. Its latest rapid test product is designed for at-home use, and cheaply provides consumers with results without the use of any complicated and pricey laboratory equipment.
Given the high demand for testing, Abbott should continue to prosper, especially if it continues to innovate on consumer testing solutions. In particular, the company's NAVICA smartphone app to track test results will likely be a major driver of value for consumers seeking testing products in a growing field of competitors. Expect Abbott to continue developing and releasing more sophisticated coronavirus diagnostic tests and emphasizing digital solutions like NAVICA that add perks like traceability and third-party verification of diagnostic results.
3. Co-Diagnostics
Unlike Abbott or J&J, Co-Diagnostics (CODX -0.87%) is a small-cap stock that's growing like wildfire. This year, the company sold more than 10 million of its coronavirus molecular diagnostic tests, earning it $21.8 million in the third quarter alone. But Co-Diagnostics is just getting started, and management expects its performance to be even better next quarter.
Investors should expect two catalysts for the stock's price after the next earnings report. First, its new at-home saliva-based coronavirus diagnostic test recently launched. Second, its joint venture in India started to sell the company's diagnostic test there in late November, which may give an even larger boost to its revenue. Next year will also be exciting for investors. Co-Diagnostics is working on a new molecular test that's intended for use in research contexts to detect coronaviral mutations. It's also working on a new line of research-use multiplexed tests that detect influenza A, influenza B, and coronavirus from the same sample. Stay tuned for the company's next earnings report to see how much new revenue these projects are earning, and invest accordingly.
