Pfizer (PFE 1.42%) and Moderna (MRNA +11.97%) were both leaders in the coronavirus vaccine market. However, as sales of these products have declined significantly in recent years -- due to the pandemic receding and more stringent regulatory oversight regarding who is eligible for the vaccine -- both companies have delivered unimpressive financial results. Pfizer and Moderna are diligently working to launch new products and turn things around. And if their strategies pan out, they could produce strong returns from here on out. But which one has more upside?
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Size matters
Pfizer is by far the larger and better-established drugmaker. With a market cap of $156 billion, the pharmaceutical leader boasts a deep product portfolio across several therapeutic areas. Even with a slowdown in covid-related sales, Pfizer generates over $60 billion in annual revenue. It also has a deep pipeline that should make meaningful progress this year and the next, even as the company encounters patent cliffs in the coming years, including that of its anticoagulant, Eliquis. Even though pipeline and regulatory progress could jolt the stock, larger drugmakers are less likely to experience significant price swings amid ongoing clinical developments. That's why Moderna may have more upside.
It is a much smaller biotech -- its market cap is about $22 billion -- whose ongoing work in developing mRNA-based vaccines may help it launch innovative products. Case in point: Moderna is up 69% this year alone, partly due to data from a five-year follow-up of a mid-stage study of its investigational cancer vaccine, mRNA-4157. The company found that this product, in combination with Merck's Keytruda, continues to reduce the risk of recurrence or death in patients with advanced melanoma compared with Keytruda alone.
NASDAQ: MRNA
Key Data Points
Although this result is highly encouraging -- and mRNA-4157 is ongoing several phase 3 studies and could be an important launch -- Moderna's 69% gain this year is almost unheard of for a drugmaker the size of Pfizer in a mere three months. Moderna has more promising pipeline candidates, including an investigational influenza vaccine that is being considered for approval by authorities in the U.S.
Several others are in phase 2 or phase 3 studies and could be important breakthroughs. For instance, Moderna is developing a potential HIV vaccine. Moderna's smaller size and attempts to revolutionize the vaccine market grant it more upside than the larger, more traditional drugmaker, Pfizer.
But which is the better buy?
Moderna may have more upside, but it also has more downside potential. Think of what will happen if the U.S. Food and Drug Administration declines to approve its flu vaccine, or if its mRNA-4157 fails to prove effective in phase 3 studies -- or both. The company's shares will drop off a cliff, erasing much of the gains it has accumulated this year. By contrast, Pfizer can handle clinical or regulatory setbacks better. Its larger pipeline and significant annual sales grant it wiggle room that Moderna doesn't have, at least not as much. Pfizer is more financially flexible and can manage setbacks by investing more in R&D, acquiring a new company, or in many other ways.
NYSE: PFE
Key Data Points
That's what it did recently: After failing to develop weight management medicines internally, Pfizer made a strategic acquisition and now owns MET-097i, one of the more promising weight loss drugs in development. This financial strength makes Pfizer the less risky of the two. And Pfizer has other qualities as well. For instance, the company pays a regular dividend. Pfizer's poor performance in recent years has pushed its yield to a juicy 6.3%, well above the S&P 500's average of 1.2%.
Pfizer has increased its payouts by about 51.3% over the past decade. So, which is the better buy: Pfizer or Moderna? Investors with an appetite for risk and volatility should opt for the latter. Those looking for solid, blue chip dividend stocks, on the other hand, should invest in Pfizer.
