With the COVID-19 pandemic surging back in intensity again due to the spread of the omicron variant, investors might be wondering what to do next. Three of our Foolish contributors have singled out companies that they expect will be leading the charge to protect us from the coronavirus over the next several years -- and that will likely outperform the market as they do so. Here's why they like Pfizer (PFE -0.88%), AstraZeneca (AZN 0.21%), and Novavax (NVAX 1.11%).
Boost your portfolio with this top pharma stock
George Budwell (Pfizer): Pfizer's stock is up by 61.8% so far this year, crushing the broader market due to the massive commercial success of Comirnaty, the COVID-19 vaccine it developed in partnership with BioNTech. Through the first nine months of 2021, Comirnaty racked up a whopping $24.3 billion in sales. Pfizer expects the vaccine to ultimately haul in more than $36 billion for the whole of 2021.
While Pfizer's explosive move higher this year might make the stock off-putting to bargain hunters, the deeper truth is that the drugmaker's shares are probably still undervalued, thanks in no small part to omicron. Due to the rapid global spread of this highly infectious variant, worldwide demand for COVID-19 vaccines -- especially ones that have been shown to be effective against omicron -- should remain strong in 2022. Fortunately for Pfizer and its shareholders, a small pilot study recently showed that a third dose of Comirnaty significantly boosted immune protection against the omicron variant in elderly people. As a result, Wall Street thinks this vaccine could generate close to $30 billion in sales next year.
What's more, last Wednesday, the Food and Drug Administration (FDA) granted Emergency Use Authorization for Pfizer's oral COVID-19 pill, Paxlovid, for adult patients with mild to moderate forms of the disease, as well as for COVID-19 patients 12 or older who are at risk of progression to severe cases. That's an extremely favorable label from a commercial standpoint. Pfizer stands a real shot at hauling in more than $25 billion from Paxlovid sales next year alone.
So, in total, Pfizer might reap $55 billion in coronavirus product revenues in 2022. If that prediction bears out, the pharma titan's shares are trading now at less than 3 times forward sales, which is a bargain-basement valuation for a top big pharma company.
Another protective shield against coronavirus
Patrick Bafuma (AstraZeneca): Until recently, there were only three effective tools people could use to significantly reduce their odds of contracting COVID-19 -- vaccinations, masks, and social distancing. Unfortunately, a significant chunk of the world's population is immunosuppressed -- 7 million people in the U.S. alone -- whether due to illnesses or the drugs they are taking because of their illnesses. And for those people, vaccines may not generate an adequate immune response to protect them.
Pharma giant AstraZeneca hopes to make life amid the pandemic less hazardous for those patients with its recently approved treatment, Evusheld.
Evusheld, which received Emergency Use Authorization from the FDA earlier this month, is a combination of two long-acting monoclonal antibodies, and the only antibody therapy authorized in the U.S. for COVID-19 pre-exposure prophylaxis. That means it can be administered for the prevention of SARS-CoV-2 at any time before a person contracts the illness. And since EvuSheld is delivered as a shot in the arm rather than an infusion, it's much easier logistically for healthcare systems to administer.
Patients treated with Evusheld showed an approximately 77% reduction in the development of symptomatic COVID-19 for at least six months in a phase 3 study. This makes the drug a powerful tool in keeping at-risk patients out of the hospital. Washington has taken notice as well: The federal government has already entered into an agreement to purchase 700,000 doses. Regeneron's REGEN-COV antibody cocktail is costing the U.S. government $2,100 a dose; if AstraZeneca prices Evusheld similarly, that's about $1.5 billion in revenues already locked in for the European pharma giant. The company has narrowly outpaced the S&P 500 over the last five years, with gains of 107% to 102%, but add in its dividend (which yields 2.5% at current share prices) and its lead widens. Between Evusheld and newly approved asthma treatment Tezspire -- which looks like a potential blockbuster -- the future is promising for AstraZeneca shareholders and patients alike.
Why Novavax should zoom higher
Taylor Carmichael (Novavax): Novavax remains an outstanding opportunity heading into the new year. Both the World Health Organization and the European Union have approved the biotech's COVID-19 vaccine for emergency use. Next week, the company expects to file for an EUA with the FDA as well.
The stock is still significantly off the high of $331 it hit on Feb. 9. It's now trading in the neighborhood of $177.
But that means investors have a wonderful opportunity to jump in. Novavax will make billions off its COVID-19 vaccine next year. With a $13 billion market cap, the downside risk is minimal at this point. Analysts estimate Novavax's forward price-to-earnings ratio at 3.39 right now. That's significantly cheaper than Pfizer's ratio of 11 or AstraZeneca's ratio of 16.
More than 40% of people worldwide have yet to receive a first dose of COVID-19 vaccine. Novavax will be providing a lot of those jabs as its manufacturing shifts into overdrive. The company forecasts it will provide 2 billion doses of its vaccine in 2022. And of course, this will be no one-and-done affair. As we've seen already, booster shots will be necessary. I expect that COVID-19 vaccinations will be administered annually like flu shots. So even after the emergency recedes, Novavax's market opportunity is not going away.