For much of 2020, pharma stocks lagged compared to the S&P 500. While the equities index rose by 17% over the past year, the pharma industry benchmark only appreciated by about 11%. But for those with a contrarian mindset, it can pay off to look into stocks when their overall sector is underperforming. You may even find some diamonds in the rough.
Indeed, while its competitors were slowing, two pharma stocks have made investors wealthy. The global pharma industry is set to grow by 3% to 6% per year and be worth over $1.5 trillion by 2023, according to research from Reportlinker. Let's look at why these stocks are a safe bet on the trillion-dollar industry.
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1. Regeneron
The sky is truly the limit for Regeneron Pharmaceuticals (REGN -0.09%). The blue chip drugmaker generated yet another year of outstanding revenue and earnings growth in 2020. For starters, Eylea, its treatment for retinal diseases, brought in over $4.9 billion in U.S. sales in 2020. That's a sizable gain over the $4.6 billion in revenue for 2019, especially considering that the drug's sales grew by 10% year over year in the fourth quarter of 2020. Eylea is among the most popular injections for treating the degeneration of the retina. Since launch, there have been over 30 million doses of Eylea administered worldwide.
Regeneron also markets Libtayo, an immune checkpoint inhibitor for treating squamous-cell skin cancer, which brought over $99 million in sales for the third quarter of 2020 (ended Sept. 30). Back in the third quarter of 2019, the drug only generated $48 million in revenue. The company plans to expand Libtayo's label to target basal cell carcinoma and non-small cell lung cancer. It is currently pending regulatory review for those conditions, with decisions expected in the first quarter of this year.
Next up is Dupixent, a drug that treats eczema, asthma, and sinus infections. Back in third quarter 2020, its sales increased to $1.07 billion from $633 million in the prior year's quarter. Approximately 190,000 patients in the U.S. out of a potential 3 million are receiving Dupixent. It is currently in clinical trials for targeting eight other diseases. If successful, the potential patient market for Dupixent could reach 4 million by 2023.
The last of its promising drug products is its antibody cocktail for treating COVID-19. In clinical studies, the antiviral demonstrated a significant survival benefit for patients with COVID-19 compared to placebo. Based on these results, the Department of Defense awarded a $2.6 billion contract to Regeneron in exchange for 1.25 million doses of the antibody treatment on Jan. 21. The U.S. Food and Drug Administration (FDA) issued an Emergency Use Authorization (EUA) for the therapy back in November.
Without a doubt, Regeneron's track record of growth shows no sign of stalling. Also, the company has a valuation of 6.7 times revenue and 20 times earnings. It is relatively inexpensive compared to the biopharma industry average of 8.1 times sales and 31 times profits. Year to date, the stock has already returned more than 12% to investors.
2. CureVac
Up a stunning 84% since its IPO in August, German biopharma CureVac (CVAC -3.46%) could arguably become one of the top-performing coronavirus stocks this year. Most of the spotlight shines on its potential coronavirus mRNA vaccine, CVnCoV.
In phase 1 clinical studies, patients who received CureVac's experimental vaccine developed the same ratio of neutralizing and binding antibodies against the SARS-CoV-2 as those who were infected with the virus and subsequently recovered. There were only moderate side effects such as fatigue, headaches, fever, muscle aches, and joint pain. The experimental vaccine is also stable at standard refrigeration temperatures.
Given the reliable efficacy data and the clinical success of prior mRNA coronavirus vaccines, it is highly likely that CureVac can advance its experimental vaccine to a regulatory clearance as well. The company expects to release interim clinical data updates for its phase 1, 2, and 3 portions of CVnCoV's investigation during this quarter. If the results are promising, CureVac projects it can clear its experimental vaccine past regulatory approval as early as the second quarter of this year.
Before the final results are out, multiple governments and private organizations alike are already vouching for CVnCoV. For starters, it already has 225 million doses of pre-orders from the E.U. for the vaccine candidate. There is also an option to supply the supranational organization with 180 million further doses.
At a price tag of 10 euros per dose, this means CureVac potentially has more than 2.25 billion euros in revenue that could arrive by the year's end. That is quite impressive for a company with a market cap of $18 billion. What's more, CureVac IPO'd just last year and only has a rabies vaccine candidate, as well as two potential oncological treatments aside from CVnCoV, all of which are in early clinical testing.
It is currently collaborating with German multinational pharma company Bayer (BAYR.Y -1.49%) to scale its manufacturing capacity. The company is setting a manufacturing target of 300 million doses this year and double that amount in 2022.
That's not all: The company has more than $1 billion in cash on its balance sheet compared to just $85 million in debt. The company has received various grants from the German government, as well as funding from the Coalition for Epidemic Preparedness Innovations (CEPI).
Compared to a net loss of $36.8 million in third quarter 2020, it has more than enough net assets on hand to keep up its research and development efforts without selling more stock to raise cash. Overall, given the vast potential of the coronavirus vaccine market and solid science, I think that this stock is a fantastic choice for healthcare investors.
