The pandemic, not the Fed, not the stimulus, not the election, is the most important driver of stock prices. Lately, it's feeling very binary: we get a vaccine sooner than expected, we save the economy. But if the process drags on, we'll need to adjust to the new normal.
Our fate is in the hands of a few dozen companies with a dizzying array of clinical trials, and whoever gets there first is gonna make a fortune. That's why CNBC decided to do something new: we surveyed 92 drug analysts and public health officials at the state and local level to handicap the chances of each of the main players.
Consider it the bettor's guide, an actual handicapping of the most important contest on earth, the race for a vaccine.
Coming in first, with the support of 21 respondents? The Oxford University-AstraZeneca (AZN) vaccine - the one we just read about in the Lancet. We know it's got an excellent safety profile and several qualities that could lead to immunity.
Second and third were tied, with Moderna (MRNA) and the Pfizer (PFE) BioNtech (BNTX) vaccine both getting 19 votes.
Fourth, CanSino Biologics (CASBF) , a Chinese vaccine company, with eight votes.
After that, Johnson & Johnson (JNJ) , Novavax (NVAX) , and the joint team of Sanofi (SNY) and GlaxoSmithKline (GSK) each got seven votes. Merck (MRK) and Sinovac got six. Sinopharm (SHTDF) and CureVvac were next with five. Inovio (INO) and Medicago each got four.
Inovio also earned the dubious honor of being the company least likely to bring its vaccine candidate to market, at least according to the 92 experts we consulted. They voted Inovio off the island.
What about Covid treatments? That's another closely contested race. Gilead's (GILD) in first with 17 votes, followed by Regeneron (REGN) in second, Eli Lilly (LLY) in third, the privately held AbCellera in fourth, and Roche (RHHBY) in fifth. Bringing up the rear, there's Vir Biotech (VIR) and GlaxoSmithKline.
Now, the more I dig into the medical research, the more I realize that a vaccine is essential. If Covid's really as virulent as the experts say, you'd better pray one of these injections works, because that's the only way we beat it for good.
But I also realized something else: the race for a vaccine might have more than one winner. We may need to take several shots at this thing. It could even be like the flu where there's a new vaccine every year.
With that in mind, how do we take advantage of this poll? Maybe that's in bad taste, but my job is to help you try to make money in the stock market, so how do we game the race for a vaccine?
Okay, what I find most interesting about our survey is that the stage of testing doesn't seem to matter that much. For example, Novavax got a $1.6 billion commitment from the government to complete their testing and scale up manufacturing - they start phase 3 trials in the fourth quarter. Yet Novavax is tied with J&J, which hasn't even started human trials, as well as the Sanofi-Glaxo shotgun marriage, which goes into human trials in September.
I think the excitement about the AstraZeneca vaccine makes sense. I know many people who want in on the trials because the initial results were so promising, even though the stock has been crushed since the data came out on Monday. Why did people sell the news? I think the expectations got out of control - buyers wanted a miracle, instead they got something very positive, but still within the bounds of reason.
The thing about vaccines is that the FDA will never just stop the trials and preemptively declare a winner, which sometimes happens with regular drugs. Testing a vaccine takes time because that's the only way to be sure it works. You give it to thousands of people and then wait to see if they get sick. There's no way to accelerate that process.
But even though we can't really speed this up, I like AstraZeneca's stock here, down nine from its recent highs with a 3.4% yield and an excellent anti-cancer franchise.
Next one's tough. I used to be a huge fan of Moderna because they have an exciting AI powered approach to drug development. But then the company revealed some positive data on its Covid vaccine right at the same time as executives dumped the stock, and it left a bad taste in mouth. I understand that those execs had sell plans in place, but as someone who's created and used sell plans myself, I can tell you they should've been cancelled going into this high profile announcement.
I think Moderna's become too promotional, too quick to praise its own work off a very small sample size, which is odd because they've never actually produced a vaccine before. I loved this stock in the twenties and thirties and forties and fifties, but up here at $75? No thank you.
By contrast, Pfizer's partnered with the German BioNTech, and they've been remarkably non-promotional about their relative success. BioNTech's stock is too binary for me - they don't have enough other shots on goal. But Pfizer has a portfolio of decent, albeit boring, drugs, and while there's nothing huge in the pipeline, the company's got very deep pockets, so if their vaccine doesn't win, they can always make some acquisitions. Like Moderna, Pfizer's reached phase 3, the homestretch, and it just got $1.95 billion from the U.S. government to produce a vaccine. The Feds will own the first 100 million doses - seems fair.
I can't say much about CanSino Biologics. It's a Chinese stock and the only Chinese stock I'm willing to recommend is Alibaba (BABA) because the PRC's stock market doesn't have enough regulations enforcing transparency.
But let's talk about the three vaccines that are tied with seven votes: J&J, Novavax, and the Sanofi-Glaxo team-up. I think the Sanofi-Glaxo candidate has great possibilities because both companies have excellent vaccine divisions, though they're late to the party.
Novavax is ultra-high-risk, ultra-high-reward. It's a total long shot that's trading like it's already won because of that $1.6 billion commitment from the President's Operation Warp Speed initiative.
Which leaves me with my favorite: Johnson & Johnson. I'm hearing nothing but good things about their trial, even as it's only now has gotten to phase one. More importantly, aside from Covid, J&J has the best pipeline of any of these drug companies. Their vaccine could fail and the stock wouldn't even go down - that's how cheap this thing is. I think it's a buy right here.
There's not much to say about the others. I like Regeneron for its Covid treatment, but I like it even more for its non-Covid drugs, including a surprisingly strong oncology portfolio. As for Inovio, the handicappers have spoken and they say sell it.
We in the end went with JNJ for the trust because of its many shots on goal. I think Regeneron and AstraZeneca work, too.
(Johnson & Johnson is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells JNJ? Learn more now.)
