Since the beginning of the pandemic, AstraZeneca (NYSE:AZN) was among the likely winners in the COVID-19 vaccine race. The company has joined forces with the University of Oxford to develop its candidate, AZD1222. But investors recently got a bitter reminder of the difficulties and risks of clinical trials. AstraZeneca had to pause its trial after patient showed serious neurological symptoms on September 8th. Although the trial resumed after a few days, it was a wake up call for investors who are looking to profit from these efforts. Although adverse regulation are quite common in clinical trials, especially of that magnitude, it was still enough for its stock to drop about 8 percent. Fortunately, AstraZeneca’s stock rebounded relatively swiftly the next day as it became clear that the initial news wasn’t as damaging to the entire program as it initially seemed. For now, there’s no certain sign that there is something wrong with AZD1222. So this time, AstraZeneca pulled through.
Competitive landscape
Astrazeneca was fast out of the gate and was one of the first to start a phase 2/3 clinical trial back in May. It was seen as the promising candidate by both the U.S. government and the European Union. Only a few companies in this race received such support. Meanwhile, the trio Pfizer Inc (NYSE: PFE)-BioNTech (NASDAQ: BNTX)-Fosun Pharmaceutical (OTC: SFOSF) is going turbo to launch its candidate in the upcoming months. Johnson & Johnson (NYSE: JNJ) also as it launched its Phase III in Europe. The Sanofi (NASDAQ: SNY)- GSK (NYSE: GSK) duo plans to finalize its last stage by the end of the year. This race is going faster than Formula 1.
But this is a reminder that clinical trials inevitable come with potential pitfalls. Moreover, one obstacle is all it takes to sink a company’s stock.
The strength of AstraZeneca
AstraZeneca’s stock has benefitted from its vaccine development as its shares are up 7.7% year to date. But this isn’t that much because the company was doing more than fine before the pandemic struck. Over the trailing-12-month period, its sales were $25.7 billion resulting in a net income of $2.15 billion from multiple products and programs in its pipeline. In other words, even if it does not find a way to win COVID-19, AstraZeneca will be just fine.
Competitors
By contrast, the success of Inovio Pharmaceuticals (NASDAQ:INO) and Moderna (NASDAQ:MRNA) greatly depends on the outcome of their COVID-19 efforts.
Inovio’s stock is up by 202.4% year to date. Moreover, its market cap skyrocketed from $325.37 million on January 2nd to $1.67 billion. The vaccine will literally make or brake Inovio as these gains have been almost entirely driven by its efforts to develop a vaccine for COVID-19. Its stock could easily burn in flames if any sort of obstacle arises. Moderna is in the same boat. Its shares are up by 199.1%, expanding its market cap from $6.47 billion to $23.11 billion in the same timeframe. Moreover, its cap seems too high for a clinical-stage biotech company, so its stock could could just as easily fall off a cliff if its efforts are unsuccessful.
COVID-19 investors
Just because AstraZeneca is the likely leader, it does not mean others such as Inovio and Moderna cannot launch successful vaccines But because of the uncertainties that plague clinical trials, along with the fact that neither of two has an approved and marketed product, both are high-risk and high-reward bets. Taking a small position and closely observing developments is always a possibility, but AstraZeneca is a rare player that provides significant exposure to the coronavirus vaccine opportunity without the threat of its stock plummeting if the pharma giant doesn’t win the COVID-19 race.
A wake-up call
Leading U.S. and European pharma giants have pledged to keep safety as their priority while they develop their candidates. CEOs of nine biopharmaceutical companies pledged of scientific integrity. Putting it bluntly, they promised they will not succumb to political pressures to rush the process as the WHO’s chief referred to AstraZeneca’s pause as a ‘wake up call’.
Vaccines are always a risky scenario
The equation goes far beyond a company’s background, experience and experience. People’s immune systems respond to vaccines differently. Our immune systems are different. Previous infections and genetics can cause our immune system to respond differently. Moreover, the composition of our immune system changes throughout the course of our lives. Children are still developing so their systems are even more different than that of adults. Lifestyle such as one’s diet, exercise, stress and harmful habits such as smoking all play a part in the response of our immune response to vaccination.
That is why extensive clinical trials with numerous stages are so important. They do not only ensure the vaccine’s safety and effectives, but whether the vaccine will work for different kinds of people. One’s medical history or age can make all the difference. The bottom line is that this is a very difficult quest. Traditional medicine still has so many things to discover when it comes to preserving and restoring our health, such as how to win and prevent cancer. Scientists are learning at an exponential pace but they are still are at the very tip of the iceberg when it comes to this brand-new virus that managed to put the whole world to a stop.
It’s like a game of chess…
Although AstraZeneca seems like a safer bet in comparison to its peers, portfolios and financial position don’t weigh as much in this battle. It’s like a game of chess: you only know what your next move is. You play for the present and do your best to predict the future, knowing it is impossible to predict what will happen even after two moves. Unfortunately, one wrong move can cost you the entire game. Therefore, the best strategy for all pharmaceutical companies in this race is to play silently and speak only when it’s time to say checkmate.
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