Boxers of different weight classes are not supposed to fight each other. Lightweights shouldn’t be in the ring with heavyweights. If the actions were boxers, Novavax (NASDAQ: NVAX) it would probably be a lightweight with a market cap of around $ 8 billion. Roche Holdings (OTC: RHHB.Y) It would definitely be a heavyweight with its market capitalization exceeding $ 300 billion.
But investing is not like boxing. Each stock, regardless of size, competes with each other to earn your investment dollars. And sometimes light weights hit heavy weights. So far this year, for example, Novavax shares have shot up more than 3,400%, while Roche is up nearly 12%. Which of these actions is most likely to be the long-term champion?
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The Novavax case
Why consider buying a small biotech stock like Novavax? It has a good chance of becoming a much larger biotech stock. If he likes to play the odds, Novavax flu shot candidate NanoFlu stands out as the main reason why stocks could increase significantly more.
The company reported excellent results in March from a late-stage study that evaluated NanoFlu in a direct comparison with SanofiFluZone Quadrivalent. To use the boxing metaphor of before, the light and experimental unproven experimental vaccine NanoFlu won a technical knockout on the heavyweight and market leader FluZone.
Novavax plans to apply for FDA approval for NanoFlu based on its strong Phase 3 results. Its chances of getting approval appear to be really good, at least based on history. The biopharmaceutical industry trade organization BIO investigated the FDA approvals from 2006 to 2015. BIO found that 74% of vaccine candidates who entered phase 3 testing later obtained FDA approval. And 100% of regulatory shipments were approved for vaccine candidates during the period analyzed.
And if NanoFlu wins FDA approval, Novavax could be on its way to tremendous commercial success. An analyst projects that the flu shot could generate maximum annual sales of $ 1.7 billion.
Novavax also has an even bigger chance, though it’s more of a remote possibility. Your COVID-19 NVX-CoV2373 vaccine candidate is currently in phase 1/2 testing. There is a long way to go and there is no guarantee that it will turn out to be safe and effective. However, if it is, Novavax will surely have a megablock on its hands.
A lot of money has been wagered on NVX-CoV2373. The Coalition for Outbreak Preparedness Innovations (CEPI) agreed to fund up to $ 388 million for the development and manufacture of the candidate vaccine. Operation Warp Speed, the initiative of the United States government to accelerate the development of COVID-19 vaccines, awarded $ 1.6 billion to Novavax for its coronavirus vaccine program.
Roche’s case
There is a very different reason to consider buying Roche shares. The health giant is unlikely to double or triple in size in the coming years. However, it provides the stability that many investors seek, thanks in large part to its diversification across the healthcare sector.
Roche’s pharmaceuticals segment generates more than three-quarters of its total sales. Its best-selling pharmaceuticals include the anti-multiple sclerosis drug Ocrevus, the breast cancer drug Perjeta, and Tecentriq cancer immunotherapy. But the company’s line also includes 37 other approved products.
More winners could be on the way. Roche’s portfolio includes a long list of programs in advanced stages. Most of them are looking for additional indications for already approved medications. However, it also has promising new late-stage candidates such as RG6042, which focuses on the treatment of Huntington’s disease, and emicizumab, which focuses on the treatment of hemophilia A.
The company is also ranked as a leader in the global diagnostics market. Roche sells a wide range of diagnostic products, from diabetes care products to next-generation molecular diagnostic platforms and sequencing systems.
The COVID-19 pandemic presents growth opportunities for Roche on a couple of fronts. Roche quickly established itself as a leader in COVID-19 testing. She is also evaluating rheumatoid arthritis medication Actemra in combination with Gilead Sciences‘remdesivir in the treatment of patients with COVID-19 with severe pneumonia. However, Actemra was unsuccessful in an early-stage study as monotherapy in the treatment of COVID-19-related pneumonia.
Roche generated revenue of almost $ 61.5 billion last year. She made nearly $ 13.5 billion in profit. The company pays a dividend that currently pays about 2.5%. This underscores Roche’s financial strength, which Novavax cannot compete with at the moment.
Better buy
Which of these two actions is the best choice? It totally depends on your investment style.
Risk-averse investors are likely to prefer Roche because of its stability and dividends. More aggressive investors will likely see Novavax as the best option.
My opinion is that there are other large healthcare stocks that offer better growth prospects and stronger dividend yields than Roche. However, I like Novavax as a speculative work. It’s certainly risky, but my opinion is that Novavax might have more room to run.
