Don’t buy the hype around coronavirus vaccine and treatment companies

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That’s why some drug stock specialists say people shouldn’t bet on the winners and losers of vaccines.

And just this week Eli Lilly (LLY), the maker of an antibody cocktail touted by President Trump after being diagnosed and treated for coronavirus, said he was also suspending a clinical trial.

The two companies have also filed for emergency use authorization for their treatments with the Food and Drug Administration.

Drugmakers and biotech are naturally working feverishly to try and develop a vaccine or treatment for Covid-19.

Pfizer (PFE), BioNTech (BNTX), GlaxoSmithKline (GSK), Novavax (NVAX) and Modern (RNAm) are some of the other big companies working on a vaccine. All have also received funding from the US government’s Operation Warp Speed ​​program.

But investors probably shouldn’t rush into these stocks in the hope that one of them will be the first to come up with an effective vaccine.

Vaccines may not be very profitable for big pharma and biotech companies

For Big Phrama companies, a vaccine is unlikely to move the financial needle, so to speak.

“Big companies like Pfizer and J&J aren’t looking to make a ton of money from a vaccine,” said Kyle Dennis, founder of the BiotechBreakouts business site.

Dennis noted that most vaccine manufacturers will end up having contracts negotiated by the government. A vaccine is therefore unlikely to be a big generator of income or profits.

Investors should also be wary of stocks of Covid-19 vaccines and treatments simply because many of them have already jumped ahead and beating the media.

Regeneron is up over 60% this year. Moderna and another small biotech named Inovio are each up about 300% in 2020.

And Novavax (NVAX) has skyrocketed to 2,840%, from around $ 4 in early 2020 to a current price of $ 117.

“I am skeptical of the so-called Covid games. Personally, I would avoid them all. They are all overrated. Even successful companies could be overvalued, ”said Brad Loncar, a biotech investment expert who heads The Cancer Immunotherapy FNB (CNCR) and The China BioPharma ETFs (CHNA).

“There are a lot of people who are not traditional biotech investors who are making the headlines but who are not doing the homework to understand what the financial payoffs will be,” Loncar added.

Loncar agreed with Dennis that few, if any, healthcare companies will generate significant long-term income or profits from a vaccine or treatment.

He also said that a vaccine is ultimately more important than drugs that can relieve symptoms of Covid-19.

“We have to have a vaccine. This is our ticket. We are not going to fill football stadiums with 80,000 people until there is a vaccine, ”said Loncar.

But the hope of having at least one vaccine (if not more) ready in the coming months could be too ambitious. Dennis noted that since biotech and big pharmaceutical companies are moving so quickly to develop a vaccine for the coronavirus, there will likely be more setbacks in clinical trials.

“It’s an aggressive schedule, so it’s a bit of a concern. Looking at these schedules, we have never produced a vaccine so quickly. So there are risks, ”said Dennis.

Cancer treatments are more lucrative than Covid-19

Investors must also focus more on other diseases, Loncar said.

For example, Loncar owns Moderna and BioNTech because of their pipeline of anticancer drugs as opposed to coronavirus vaccines. It also owns shares of Gilead Sciences (BROWN), whose remdesivir has also been used to treat Covid-19.

But Loncar noted that he was mostly bullish on Gilead because of his cancer drug portfolio. The company announced last month that it was purchasing oncology biotechnology Immunomédique (IMMU) for $ 21 billion.

“The deal with Gilead shows he is preparing for the post-Covid era,” Loncar said.

Dennis also said investors should focus more on cancer and other serious illnesses than Covid. He recommends biotechnologies Black Diamond Therapeutic (BDTX) and Karyopharm Therapeutics (KPTI). Dennis also likes Global Blood Therapeutics (GBT), which he told CNN Business he owned.

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