You don’t have to be an infectious disease expert to know that Modern (NASDAQ: MRNA) It is among the leaders in the development of a new coronavirus vaccine. Moderna’s mRNA-1273 vaccine was on the COVID-19 vaccine candidate list for federal funding as part of Operation Warp Speed. World Health Organization chief scientist Soumya Swaminathan believes Moderna is in a close second behind AstraZeneca in the race to develop a COVID-19 vaccine.
But while many people have heard of Moderna, there is a lesser-known company that is also in the thick of efforts to fight COVID-19: Catalent (NYSE: CTLT). Is this under-the-radar stock a better coronavirus game than Modern?
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Sale of “picks and shovels”
It is sometimes said that the best way to get rich in the gold rush days was by selling picks and shovels. Supporting the gold miners was more lucrative than mining it. You can think of Catalent as selling “pickaxes and shovels” to the biopharmaceutical industry.
Catalent focuses on providing delivery technologies and development solutions for a wide range of consumer medicines, vaccines and health products. The company helps drug manufacturers speed up the development process to get their products to market faster. And it is involved in multiple stages of development, from preclinical testing to manufacturing.
How successful has Catalent’s business model been? The numbers speak for themselves. The company has participated in almost half of the new FDA-approved drugs in the past 10 years. It produces about 73 billion doses each year for almost 7,000 products. Last year, Catalent’s clients included 83 of the top 100 brand name drug companies and 21 of the top 25 generic drug companies.
In fiscal year 2019, Catalent generated revenue of more than $ 2.5 billion with earnings of $ 137 million. Its share price has more than doubled in the past three years.
Central coronavirus
Unsurprisingly, Catalent has become a central player in helping drug makers develop COVID-19 vaccines and therapies.
At the end of April, Johnson and Johnson He turned to Catalent to make his main candidate for the COVID-19 vaccine. J&J plans to advance its vaccine to clinical trials later this month. Just a few days later, Catalent announced a deal with Arcturus Therapeutics to make your COVID-19 vaccine a candidate.
Small pharmaceutical company Spicona partnered with Catalent in June to develop a COVID-19 vaccine based on virus-like proteins (VLPs). Catalent is using its cell line development technology to produce the recombinant VLP for Spicona.
The two leaders in the coronavirus vaccine race have also partnered with Catalent. In June, Catalent signed agreements with AstraZeneca and Moderna to manufacture their respective COVID-19 vaccine candidates.
However, Catalent has not only attracted vaccine manufacturers. The company partnered with Humanigen to support late-stage lenzilumab testing in the treatment of patients with COVID-19 pneumonia. It is working with Ennaid Therapeutics to develop a powdered capsule formulation of Ennaid’s antiviral drug ENU200. Catalent is also helping Biosig Technologies ViralClear subsidiary develops oral dosage forms of ViralClear’s antiviral drug merimepodib.
Better than Modern?
This surge of coronavirus-related activity has helped boost Catalent’s shares nearly 30% more so far in 2020. However, that’s far less impressive than Moderna’s nearly 200% profit. But could Catalent be the best long-term stock?
The analogy with the days of the gold rush is good to keep in mind. The pick and shovel sellers made money regardless of whether gold was found or not. They did better than the many gold miners who never discovered a significant amount of gold. But the miners who found a significant source of gold became much richer than the pick and shovel sellers.
If Moderna’s COVID-19 vaccine fails, the biotech stock will almost certainly underperform compared to Catalent over the next year or two. Catalent will earn money by making Moderna’s COVID-19 vaccine, even if Moderna doesn’t make money. And if the other Moderna pipeline candidates are unsuccessful, you can be confident that Catalent will offer greater long-term benefits.
But it is quite possible that Moderna will find gold, figuratively speaking. In this scenario, the performance of Catalent’s shares will not be close to that of Moderna.
Many obstacles remain for the Moderna COVID-19 vaccine. However, my hunch is that biotechnology will succeed. While Catalent is definitely the least risky option, I think Moderna will be the biggest winner in the years to come.
