When it comes to the healthcare sector, investing in innovation comes with risk. In the technology sector, smaller companies have a reputation for being more flexible. But in healthcare, it’s often the opposite, as small companies tend to have all their eggs in one basket, like a leading therapy program. Similarly, the most diversified competitors are often the largest — and that means big pharma and innovation go hand-in-hand.
The three pharma companies I’ll discuss today are working on high-impact medicines that could reshape the healthcare landscape if they succeed. Even if their most ambitious attempts fail, they each have a plethora of other projects to support their share prices, not to mention ongoing revenue from their products on the market. While it’s unlikely that investors will get rich quickly by buying into such mature companies, buying $5,000 worth of any one of their stocks could be a great addition to a well-rounded portfolio.
Hot off its coronavirus vaccine approval in late 2020, Pfizer (NYSE:PFE) is already developing the next generation of vaccines. It aims to deliver around 2 billion doses of the coronavirus vaccine by the end of the year, which should bring in around $15 billion in revenue. To make the next iteration of the vaccine, it’ll work with its collaborator, BioNTech, to evaluate booster shot regimens as well as adjustments that will increase the candidate’s effectiveness against new strains of the virus.
The company could make even more money in 2022. Pfizer’s CFO Frank D’Amelio has raised the possibility of price increases for the vaccine, and management also expects that regular booster shots will be necessary to maintain immunity. On top of the anticipated long-term demand, the company will also increase its margins for vaccine manufacturing. In short, shareholders are likely to be pleased over the next few years, and that’s what makes Pfizer worth an investment today.
In contrast to Pfizer, Regeneron Pharmaceuticals (NASDAQ:REGN) is working hard to make therapies for COVID-19 rather than vaccines. Early in the second quarter of this year, Regeneron plans to report phase 3 results for its REGN-COV antibody cocktail, which is intended to prevent people who have been exposed to COVID-19 from developing symptoms. REGN-COV already earned emergency use authorization to treat mild to moderate COVID-19 in nonhospitalized adults in the U.S., but developing additional applications for the cocktail will increase its long-term revenue potential.
Inflows from REGN-COV totaled $186 million in 2020, but the company is still scaling up its manufacturing facilities to produce even more in 2021. Aside from its phase 3 trial for REGN-COV, the company also has a pair of programs in phase 1 and phase 2. Over the next couple of years, the combination of rising manufacturing capacity and (hopefully) expanding indications for the antibody cocktail could deliver substantial returns for shareholders. That’s assuming widespread vaccination doesn’t totally curb demand for therapeutic interventions.
If you’re tired of hearing about coronavirus medicines, don’t worry: Biogen (NASDAQ:BIIB) doesn’t make any. Instead, it develops drugs for neurological disorders like multiple sclerosis and Alzheimer’s disease. In fact, Biogen is facing significant uncertainty surrounding the U.S. Food and Drug Administration’s (FDA) decision on one of its Alzheimer’s disease therapies in development. The drug, aducanumab, appears to be safe, but the FDA questioned whether it was effective for slowing the progression of the disease and mitigating cognitive impairment, so the company recently submitted another packet of clinical data for examination.
Regulators should have a verdict ready by early June. After that, Biogen could have a clear path to commercializing aducanumab and increasing revenue shortly after — or it could see a sharp drop in stock price if it’s a no-go. But that’s a constant risk for pharma stocks, so don’t be dissuaded. If the drug is approved, it’ll be the first treatment capable of changing the course of the disease, meaning that it could potentially be a blockbuster in the long run. Investors are right to be leery of making a purchase before the FDA’s decision, but taking a calculated risk on the stock could pay off in the long term.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.