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COVID-19 probably won’t be a fad. Despite the very real possibility that one or more vaccines will be approved in record time, doctors still hope that the viral disease will persist as a fairly common seasonal disease during the current decade. After all, vaccines are highly unlikely to be 100% effective. Furthermore, the virus is expected to mutate in a way that degrades the efficacy of first-generation vaccines and background immunity from previous infections over time.
What all this means is that COVID-19 treatments will likely be a key new product category within the world of biopharmaceuticals for a long time to come. That said, this niche area within the broader biopharmaceutical landscape is fraught with risk for a variety of reasons.
Image source: Getty Images.
Therefore, investors in search of a COVID-19 treatment may want to stick with companies that do not necessarily require a victory on this therapeutic front to propel their stocks higher. With this topic in mind, Eli lilly (NYSE: LLY) Y Regeneron Pharmaceuticals (NASDAQ: REGN) they stand out as two of the most attractive works, from a risk-reward perspective, within this emerging growth area of biopharma. Keep reading to know more.
Eli Lilly: Well Diversified Growth and Dividend Stocks
Lilly is developing two COVID-19 neutralizing antibodies, known as LY-CoV555 and LY-CoV016. Taken together, Wall Street believes that these new coronavirus therapies could generate billions in future sales, which would be a huge win for a company even of Lilly’s titanic stature.
Last month, the drugmaker applied for an emergency use authorization (US) with the Food and Drug Administration (FDA) for LY-CoV555 as a treatment for patients with milder forms of the disease. During the same update, Lilly said that she hopes to apply for USA for a combination therapy consisting of LY-CoV555 and LY-CoV016 in November.
Unfortunately, Lilly’s COVID-19 antibody program has suffered two major setbacks in the meantime. Enrollment in a late stage trial evaluating LY-CoV555 in combination with Gilead Sciences‘Veklury has since been closed due to a low probability of success. This combination therapy was being evaluated as a treatment for hospitalized patients with COVID-19. Second, the agency cited the manufacturer for problems at the place where the antibodies were made. Lilly is committed to rectifying these manufacturing problems, but these latest setbacks are sure to delay a potential USA.
What is important to understand is that these experimental antibodies are essentially the icing on the cake from an investment standpoint. Lilly already has one of the best growth portfolios in the business, with numerous high-powered products such as the diabetes drugs Trulicity and Jardiance, the immune drugs Taltz and Olumiant, and the cancer treatments Verzenio and Tyvyt. To top it off, Lilly offers shareholders a fairly respectable dividend yield of around 2% at current levels.
Bottom line: Lilly’s stock is arguably worth owning, regardless of what happens to these promising COVID-19 antibodies.
Regeneron: a proven growth game
The Regeneron REGN-COV2 antibody cocktail, consisting of two potent neutralizing antibodies known as REGN10987 and REGN10933, is perhaps the best-known COVID-19 therapy among the general population, thanks to its use during President Trump’s recent attack on the disease. Although the therapy has yet to be approved in any form, the president was able to receive the experimental antibody combination through the FDA’s compassionate use program.
Recent events suggest that REGN-COV2, like Lilly’s antibodies, is not particularly effective in treating patients with severe cases of COVID-19. However, the therapy has shown a clear ability to reduce viral load among patients with milder cases of the disease.
Regeneron, in turn, appears to be confident of obtaining an EUA for REGN-COV2 as a prophylactic treatment for people at risk and / or as an interventional drug for less severe COVID-19 cases, in the less severe cases. Distant future. So, in short, this powerful antibody therapy should become a healthy income generator for biotech.
However, REGN-COV2 is not the primary reason to buy this large cap biotech growth stock. Regeneron’s top line has increased lately due to newer products, such as the allergy drug Dupixent and the immuno-oncology treatment Libtayo. Additionally, this major biotech company has an extremely strong clinical portfolio, a healthy balance sheet, and an attractive valuation, with its stock trading at less than 15 times prospective earnings at this time.
The key takeaway: Regeneron will almost certainly benefit financially from its COVID-19 antibody program for the next two to three years. But your long-term outlook doesn’t hinge on this singular drug candidate, a fact that should appeal to the risk-averse crowd.
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