Are Covid-19 Treatment Stocks A Buy As Global Infections Rise Again?

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PFE: Pfizer logo
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Pfizer

Our indicative theme on Covid-19 Treatment Stocks – which includes biotech and pharma companies selling or developing treatments for the Covid-19 virus – has declined by about 2% year-to-date, outperforming the S&P 500 which has declined by about 6% over the same period. While the markets have broadly moved beyond Covid-19 as a theme, with work from home stocks, software names, and vaccine stocks seeing massive sell-offs, Covid-19 treatment stocks have fared better for a couple of reasons.  While vaccines have seen a relatively wide rollout, and have proved successful in reducing the severity of the Covid-19 infections, they haven’t been as effective as we’d hoped in ending the pandemic, given continuous mutation of the virus and diminishing immunity provided by vaccinations. For example, daily Covid-19 cases are surging once again to near all-time highs in regions including Germany and China despite relatively high vaccine coverage, as a subvariant of the omicron virus spreads. The seven-day worldwide moving average of infections has also risen from under 1.5 million in early March to about 1.8 million currently.

Let’s take a closer look at the Covid-19 treatment stocks in our theme. Pfizer (NYSE:PFE), which was a pioneer in the Covid vaccine space, appears to have a lead with treatments as well. The company’s antiviral drug Paxlovid, which is authorized in the U.S. for people aged 12 and older, was almost 90% effective at reducing the risk of hospitalization and death based on a study in high-risk adults. Moreover, this antiviral drug can be taken orally, unlike previous treatment options, which needed to be administered intravenously. This can potentially reduce the impact on the healthcare system considerably. Pfizer has indicated that it expects Paxlovid sales of a whopping $22 billion for 2022. Merck (NYSE:MRK) and Ridgeback Biotherapeutics also sell an oral antiviral called Molnupiravir, which was approved for use by the FDA in December. However, the uptake of the drug has been low, as it is apparently much less effective than Pfizer’s pill, decreasing the risk of hospitalization from Covid-19 by just about 30%. Other players in the Covid-19 therapeutics space include Gilead Sciences (NASDAQ:GILD) , whose moderately effective Remdesivir was the first Covid-19 antiviral approved by the U.S.Food and Drug Administration and Regeneron Pharmaceuticals (NASDAQ:REGN) which sells antibody cocktails for Covid-19. Separately, Incyte (NASDAQ:INCY) has been exploring the use of its arthritis drug Baricitinib for Covid-19 treatment.

Also check out our theme of Covid-19 Vaccine Stocks and Covid-19 treatments

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What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

 Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 PFE Return 16% -8% 68%
 S&P 500 Return 2% -6% 99%
 Trefis MS Portfolio Return 2% -8% 262%

[1] Month-to-date and year-to-date as of 3/20/2022
[2] Cumulative total returns since the end of 2016

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