The biggest coronavirus vaccine stocks posted explosive gains over the past couple of years. Vaccine leader Moderna (MRNA 3.28%) surged 1,200% over that time period. And latecomer Novavax (NVAX 2.95%) soared a mind-boggling 3,400%. But recent performance hasn't been so bright. Vaccine stocks have been on the decline -- even as some of these companies have reported billions of dollars in revenue and profit.
The pandemic continues. But some experts predict it may shift to an endemic situation as soon as this year. As a result, investors have been worrying about the financial picture for these companies once the coronavirus situation eases. Does this mean it's too late to buy vaccine stocks today? Let's find out.
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Biotechs are declining the most
First, a look at recent performance. Biotech companies -- the ones that most benefited from coronavirus news and gained in the past -- today are suffering more than big pharma vaccine makers.
This isn't surprising. These companies depend more on vaccine sales for near-term revenue than pharmaceutical companies with many products on the market.
Now, let's have a look at the coronavirus situation. Through vaccination, natural immunity, and the emergence of treatments, it's likely the coronavirus threat will ease. But that doesn't mean the virus is set to disappear. Health officials predict the coronavirus will continue to circulate -- like the flu or chicken pox -- but without the extreme infection rates of a pandemic. This means we still need protection. And that comes in the form of vaccination.
Vaccine leaders Moderna and Pfizer (PFE 0.23%) have suggested the need for an annual vaccine or booster. Of course, uptake probably won't be as high as during the worst of the pandemic. But if we look at the flu shot as an example, about half of the U.S. population could opt for an annual jab. Moderna and Novavax are both working on combined flu/COVID-19 shots. Such a product has a very good chance of winning over those who usually go for a flu shot.
Vaccine demand remains high
What does all of this mean for revenue? For companies selling vaccines now, it's important to note demand remains high this year. Moderna predicts vaccine revenue of at least $18.5 billion. That's higher than the so far unaudited sales figure of $17.5 billion last year. And these companies have been signing supply agreements through at least 2023. Pfizer has agreed to deliver as many as 1.8 billion doses to the European Union through that time. All of this means revenue is likely to remain strong this year and possibly next year too.
Beyond that point, it's impossible to predict an exact revenue level. But, considering the need for regular vaccination for at least an at-risk population, I don't expect revenue to plunge. Another unknown is the cost of vaccine doses. Companies may raise prices to partially compensate for some lost demand.
So, it's fair to say vaccine companies may generate a satisfying level of revenue for quite some time. It's important to keep in mind that blockbuster revenue is $1 billion in sales per year or more. Even if vaccine sales decline quite a bit from today's level, these products still might remain in blockbuster territory.
Is it too late to invest?
Now, let's get back to our question: Is it too late to buy vaccine stocks? I expect to see more short-term surges on positive news. But I don't expect these stocks to deliver the enormous gains we saw in 2020 and 2021 year after year. I think each vaccine stock will take its own particular path when it comes to stock performance -- and that will be linked to its financial health and revenue prospects. And this stock performance will play out over the long term rather than over a few months or one year.
So, if you're a long-term investor, it's not too late to buy vaccine stocks. But I will say what I've said all along -- even when vaccine stocks were soaring. Buy a healthcare stock for its entire pipeline or portfolio. Don't bet on just one candidate, drug, or vaccine. Doing that opens you up to a lot of risk. That's because a candidate can fail in clinical trials or sales of a drug or vaccine can drop for various reasons.
Luckily, some of today's leading vaccine stocks also have strong pipelines or portfolios. Moderna has 40 programs in the pipeline. And the company recently started a pivotal trial of its cytomegalovirus (CMV) candidate -- a potential blockbuster. Pfizer commercializes several blockbuster drugs and has 94 candidates in the pipeline.
All of this means you can take advantage of the recent declines in some of these stocks to pick up a good company at a bargain. Pfizer and Moderna both are trading at less than eight times forward earnings estimates, for example.
MRNA PE Ratio (Forward) data by YCharts
If you do invest now, you may not reap the rewards quickly like you would have a year ago. But that's OK. Some of today's vaccine stocks have what it takes to deliver great, lasting rewards down the road.
