On Friday we saw a major sell-off in COVID vaccine stocks. Novavax (NVAX 1.16%) dropped 12%, and shares of Moderna (MRNA -1.11%) fell 11%. Meanwhile, another healthcare sector was soaring: stocks with oral treatments for COVID.

Shares of Merck (MRK -0.94%) ran up 9%, and Atea Pharmaceuticals (AVIR 1.78%) flew 20% higher. Shares of Pfizer (PFE 0.91%) barely moved for the day, perhaps because the megacap has both a vaccine and an oral treatment in the works. Read more to find out why our trio of Fools like Pfizer, Atea, and Merck in the war against COVID.

Woman takes two pills with a glass of water

image source: Getty Images

1. Pfizer: The next phase of the pandemic

George Budwell: Pfizer expects to book $33.5 billion in 2021 COVID-19 vaccine sales. Nevertheless, the pharma giant might already have its next megablockbuster coronavirus therapy in hand. Pfizer is currently trialing an oral antiviral medication, known as PF-07321332, as a treatment for various types of COVID-19 patients. The drug reportedly works by keeping the virus from replicating.

Merck's oral antiviral drug contender, known as molnupiravir, posted outstanding late-stage results last Friday, although this drug works through a different mechanism than Pfizer's candidate. Right now, PF-07321332 is a bit behind Merck's oral medication from a developmental standpoint. But it could produce pivotal stage data as soon as next month. If true, the first round of oral COVID medications might be on the U.S. market by perhaps the end of the first quarter of 2022.

What's the big deal for Pfizer and its shareholders? With the pool of unvaccinated patients in the U.S. and abroad slowly but surely shrinking, Pfizer's top-selling vaccine will eventually start to wane from a sales standpoint. In fact, the drugmaker's COVID-19 vaccine is probably very close to its commercial peak right now. A pill that effectively ameliorates the symptoms associated with COVID-19 ought to soften the financial blow for vaccine-makers like Pfizer, and perhaps even turn out to be a long-lived source of revenue. Therefore, Pfizer's stock might be gearing up for a nice run if PF-07321332 does indeed pan out.

2. Pills vs. shots makes Atea a winner

Taylor Carmichael: It was irrational to whack the vaccine stocks on Friday. Compared with COVID treatments, the vaccine market opportunity is astronomical. Billions of people will be vaccinated.

Atea's treatment might save some lives, though. A sizable number of people have not been vaccinated, and might never vaccinate. And even vaccinated people might catch a mutating strain of the virus. So there's still a market for COVID treatments. And it actually might be a sizable market, as governments around the world want to stockpile treatments ahead of time. A couple of weeks ago, the Biden administration paid $2.9 billion to Regeneron (REGN 1.83%) to acquire 1.4 million doses of its antibody treatment, REGEN-COV.

Atea's COVID drug candidate, AT-527, is not an antibody but an RNA inhibitor that prevents viral replication early in the infection. And what's exciting Mr. Market is that this is an oral treatment. These pills are a very large market opportunity. You can avoid hospitalization and take them at home.

We're still waiting for data from Atea's pivotal trial. The company is collaborating with pharmaceutical giant Roche (RHHBY 1.51%). Right now, Merck is in the lead, reporting positive phase 3 data from its oral COVID treatment on Friday. And Pfizer will take some market share as well, if its oral treatment is approved. 

Why buy shares of Atea? Merck is a $200 billion company, and Pfizer is a $240 billion pharmaceutical giant. Atea is a tiny company with a $3 billion market cap. The upside is incredibly large for a small-cap with a COVID treatment. The key question, of course, is whether the drug works. We'll find out in a few months. 

3. The $206 billion growth story

Patrick Bafuma: Merck recently made investors happy. The $206 billion pharmaceutical company gained about $16 billion in market cap, or about 8.4% in share price, after a press release about its COVID-19 treatment last week.

Merck's antiviral pill, molnupiravir, was found to reduce the risk of hospitalization or death compared with a placebo by just under half -- 14.1% vs. 7.3% -- at 29 days after randomization. With about 380 patients in each arm of the trial, amazingly there were no deaths reported in patients who received molnupiravir, compared with eight deaths among patients who received a placebo. Molnupiravir demonstrated consistent efficacy across multiple viral variants, including delta, gamma, and mu, which accounted for nearly 80% of the evaluable cases in the trial. All signs at this time suggest that this data is broadly applicable to the general population and that molnupiravir significantly decreases hospitalization and, more importantly, mortality from COVID-19.

In a continued wave of positive news, American patients may not have to worry about its cost. According to The New York Times, Uncle Sam's plan is to provide the treatment free of charge for the U.S. population, much like the vaccines. And the U.S. government has already ordered 1.7 million courses of treatment at about $700 per course -- about $1.19 billion. Merck expects to be able to produce almost six times that number, with capacity to produce as many as 10 million courses by the end of this year. With those sorts of estimates, it is entirely possible that molnupiravir rakes in over $5 billion in the fourth quarter alone.

The holiday season may be even more fruitful for Merck than this rosy outlook. The Transportation Security Administration routinely saw over 2 million people a day travel on a plane in the United States. However, despite only about a third of the usual holiday travel in 2020, COVID still surged. While we have vaccines now, we are at roughly 75% to 80% of pre-pandemic travel levels. That means much busier airports than 2020's holiday season, and with the potential for waning immunity, it is hard to see how molnupiravir won't be handed out like candy canes, even potentially off-label for preventative means. To this extent, I should note that Merck has a phase 3 study evaluating molnupiravir as a prophylactic, or "just-in-case-I-was-exposed," option, with a data readout in the first half of 2022.

In its last quarterly report, Merck raised revenue guidance for the year to a range of $46.4 billion to $47.4 billion, representing 12% to 14% growth. Add in what could easily be $8 billion to $10 billion annually in molnupiravir sales, and not only is its 3.1% dividend safe, but it also gives Merck lots of cash for potential buyouts. I believe the success of molnupiravir will cement the company as a bedrock of portfolios for years to come.