The pandemic has wrought havoc on our economy, but one sector of healthcare is thriving – COVID-19 vaccine development.
Several pharmaceutical companies are in various stages of research, development, and testing and are racing to develop an effective vaccine to meet worldwide demand. The first to succeed will make a fortune, and its investors will too.
Some stocks are riskier than others. A general principle of investing is, taking more risks can bring higher rewards. Low risk, lower but more certain reward. As of August 2020, there were more than 200 companies in the race to develop a COVID-19 vaccine, with more than 20 running human clinical trials. Which to invest in?
If you are just starting out investing and are compelled to invest in COVID-19 vaccine research and development, assess your risk level. If you have $500 or $1000 in excess of your current expenses, your emergency fund is fully funded, and you are funding your retirement plan, then you can afford to take more risk than someone who is nearing retirement and considering devoting part of their retirement portfolio to companies developing the COVID-19 vaccine.
Small biotech companies with no proven pharmaceuticals on the market are most at risk of loss should they not succeed in developing an effective coronavirus vaccine early, if not first. The risk of investing in these companies should be assessed according to where they are in development. For example, if a company is running clinical trials in humans, investing in that company will be less risky than investing in a company that is still in development.
In contrast, larger pharmaceutical companies with one or more approved and proven drugs on the market currently post less risk to investors. Even if they are unsuccessful in developing an effective COVID-19 vaccine and their stocks take a dip, the company should not fail as a result.
Assess also whether the company has other products in the pipeline, whether it has a track record of success and approval, and whether there have been any lawsuits over undisclosed side effects or other problems with their products. These all affect the risk of investment and whether stocks will rise or fall or potentially crash.
Second, List Pharmaceutical Companies by Stage of Research & Risk
The Exploratory Stage
The company is conducting basic research and examining the virus itself to identify potential antigens to fight it.
The Preclinical Stage
The company tests a vaccine on animals to determine whether it is safe for humans.
Clinical Trials – Phase 1
The company conducts a limited trial of 100 people to ensure that the vaccine is safe for humans.
Clinical Trials – Phase 2
Once deemed safe, the vaccine is administered to another 100-500 people to assess the efficacy of proposed doses, establish an immunization schedule, fix the method of administering the vaccine, and note the side effects.
Clinical Trials – Phase 3
The vaccine is administered to 1,000 to 5,000 people or more to test safety and efficacy over a more diverse population.
Assessing the Risk of Investing
It is a simple matter to google “COVID-19 vaccine” and takes note of where companies are in the various stages of research, development, and testing.
You might assume that the companies running clinical trials in humans will ostensibly pose the lowest risk of investment, however, not all of these trials succeed. If they do not, companies must spiral back to an earlier stage of research to address problems that have arisen. A company that rushed to clinical trials before thoroughly vetting their vaccine is more likely to encounter these setbacks, and that will affect stock value.
For example, both Johnson & Johnson’s and AstraZeneca’s clinical trials were recently halted after participants contracted mysterious illnesses. After investigations into the illnesses, each company determined they were unrelated to the vaccine and were approved by the FDA to continue trials. Not every company is lucky.
Biotech and pharmaceutical companies face other dangers. The U.S. Department of Justice recently accused China-based hackers of spying on Massachusetts company Moderna. Dr. Reddy’s Laboratories recently shut down due to a cyber-attack that compromised the privacy of its trial participants.
Another way to invest in the COVID-19 vaccine is to invest in the companies that produce the equipment needed to administer the vaccine. This takes you out of the “horse race” and into a field that is sure to profit once a viable vaccine is produced.
Last, Research Ways Small Investors Can Access These Stocks
There are myriad ways a small investor can purchase stocks or shares of stocks in any size biotech or pharmaceutical company. It the company is public, you might:
Visit a local brokerage in person;
Use an online brokerage;
Use a digital advisor;
Use a Robo advisor;
Purchase mutual funds or exchange-traded funds.
Which of these methods you use will depend upon your comfort level with technology and how much you want to be involved in monitoring your investment and adjusting your portfolio accordingly.
About the Author
Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy Philadelphia bankruptcy lawyer.