Is AstraZeneca Still A Safe Bet?

Since the beginning of the pandemic, AstraZeneca AZN was among the front-runners 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 a 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 halts are quite common in clinical trials, especially of this 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.

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 a promising candidate by both the U.S. government and the European Union.

Only a few companies in this race received such support, such as the ongoing trial from Pfizer Inc PFE, BioNTech BNTX and Fosun Pharmaceutical SFOSF or the leading candidate from Johnson & Johnson JNJ, which just launched its Phase III in Europe. The program from Sanofi SNY and GlaxoSmithKline plc GSK plans to finalize its last stage by the end of the year.

The strength of AstraZeneca

AstraZeneca's stock has benefitted from its vaccine development as its shares are up 7.7% year to date, though 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.

Competitors

By contrast, the success of Inovio Pharmaceuticals INO and Moderna 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 break 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 just as easily fall off a cliff if its efforts are unsuccessful.

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'.

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