There's a "simple" two-step process to increase one's wealth by investing in the stock market. The first is to buy shares of quality companies. The second is to wait patiently while your money grows. Of course, this process isn't quite as easy as all that. Being patient is tough amid market volatility, and quality companies can be hard to find among hundreds of choices in the stock market.
If you need inspiration, let's consider two biotech stocks with excellent prospects that could deliver solid returns: Sanofi (SNY -0.47%) and Moderna (MRNA 1.69%).
1. Sanofi
Sanofi is a French biotech company that is perhaps best known for being one of the leaders in the insulin market. However, the drugmaker's portfolio extends far beyond this area, and its most important growth drivers arguably lie outside its insulin expertise. Financial results haven't been great for Sanofi over the past few quarters, as its revenue growth has stalled -- at best.
In the second quarter, Sanofi's net sales of almost 10 billion euros ($10.9 billion) declined by 1.5% year over year although they increased by 3.3% in constant currency. Sanofi's earnings per share of 1.74 euros ($1.90) were only 0.6% higher than in the prior-year quarter (8.1% higher in constant currency). Still, Sanofi boasts promising growth drivers in its arsenal that should help it deliver stronger growth down the line.
Let's look at three of them. The first is Dupixent, a medicine for eczema that Sanofi co-markets with Regeneron Pharmaceuticals. Dupixent has been one of the stars of Sanofi's earnings report for some time now. The latest quarterly update was no different: Sales of Dupixent soared by 34.2% year over year to 2.6 billion euros ($2.8 billion). Sanofi and Regeneron are expecting a label expansion for Dupixent in treating chronic obstructive pulmonary disease (COPD) within a year. This could substantially add to its revenue, so this medicine should continue to be a key growth driver.
Second, Sanofi earned approval from the U.S. Food and Drug Administration (FDA) for Beyfortus, a vaccine against the respiratory syncytial virus (RSV), in mid-July. Sanofi is one of the first companies to earn U.S. approval for an RSV vaccine. Beyfortus was approved for children up to 24 months old; it could earn label expansions in preventing RSV in adults, too. The company estimates that the global RSV market will be worth about 8 billion euros ($8.7 billion) by 2030, and that it should be able to grab a decent slice of that pie.
Lastly, Sanofi acquired Provention Bio -- a biotech that focuses on developing medicine to prevent autoimmune diseases -- earlier this year. While Provention Bio boasts several other candidates, the key asset from this transaction looks especially promising. It's called Tzield, and is the first FDA-approved therapy to prevent the onset of type 1 diabetes (T1D). It's being tested in treating newly diagnosed T1D patients, and could be another contributor to Sanofi's growth in the long term.
The company is running dozens of clinical trials and should regularly earn key regulatory wins, thereby extending its revenue base. That's how Sanofi will improve its financial results and help its shareholders become richer.
2. Moderna
Moderna's revenue and earnings are dropping off a cliff as demand for its coronavirus vaccine plummets from 2021 and 2022 levels. In the second quarter, the biotech's revenue was $344 million, compared to a top line of $4.8 billion in the year-ago period. Moderna also reported a net loss of $1.4 billion versus a net income of $2.2 billion in the prior-year quarter. It's no wonder the company's shares are down by 46% this year.
But there is hope. Moderna's coronavirus tailwind may have come to an end, but there are a few things we learned about the company and its mRNA platform during the pandemic. First, mRNA vaccines are much faster to produce than those created with more traditional methods. Being able to move pipeline candidates faster through the developmental stages could be a significant advantage.
Second, Moderna has a rich pipeline of candidates, some of which should earn major approvals within the next two years. The company is also going after the RSV market, and recently submitted its vaccine candidate in this area to the FDA. Moderna is running other late-stage clinical trials, including one for a vaccine targeting cytomegalovirus (CMV). CMV is the most common infectious cause of birth defects in the U.S., and there are currently no vaccines to prevent it.
The company also recently moved its personalized cancer vaccine, mRNA-4157, to a phase 3 study in combination with Merck's Keytruda, in preventing recurrence in melanoma patients. Moderna has many more candidates in phase 2 studies. It should have enough money to fund these programs, having ended the second quarter with a cash and equivalents balance of $3.8 billion, along with current investments of $4.7 billion.
The near term will likely be volatile for Moderna as it adjusts to its post-pandemic situation. But given its mRNA platform and rich pipeline, its long-term prospects look solid.
