There have been few securities more exciting than pharma stocks in 2020. That’s because, in case you missed it, we’re currently suffering under the tyranny of a global pandemic. Not only has it killed hundreds of thousands of people, but it’s also brought life as we know it to a screeching halt in many respects. Companies like Regeneron Pharmaceuticals Inc (NASDAQ:REGN) weren’t widely known pre-COVID-19, but now Regeneron stock has a chance to make some serious gains in the new year.
Of course, a lot of this relies on how effective the company’s treatment for COVID-19 turns out to be as more and more people enter recovery from the disease.
But one huge shot in the arm (pun intended) for REGN stock came by way of the White House: President Donald Trump, diagnosed with (and newly recovered from, it seems) coronavirus, coming out with a ringing endorsement of Regeneron’s treatment.
Remember that Regeneron entered late-stage clinical trials in the summer to assess the effectiveness of its antibody cocktail in preventing and treating the virus. The research, run jointly with the National Institute of Allergy and Infectious Diseases (NIAID), involves testing the treatment’s ability to prevent infection in those who have had close exposure to a COVID-19 patient. (Source: “Regeneron Begins COVID-19 Antibody Cocktail Late-Stage Trial, Shares Rise,” Reuters, July 6, 2020.)
“REGN-COV2,” an experimental therapy, also entered the mid-to-late-stage phase of two trials testing its effectiveness in hospitalized and non-hospitalized COVID-19 patients. (Source: Ibid.)
While there are quite a few pharma stocks out there promising to combat COVID-19, exactly zero of them besides Regeneron Pharmaceuticals Inc has the president of the United States not only endorsing them, but also serving as a living, breathing advertisement for their drug’s effectiveness.
Now, again, just because Trump is doing better doesn’t mean that Regeneron’s treatment is the sole reason. Heck, it might not have played a major role at all—who’s to say?
But what we do know is that Trump is singing the company’s praises and serving as, at the very least, an ostensible endorsement of the drug’s effectiveness.
Whatever the actual details of Trump’s recovery may be are therefore moot; REGN stock is going to be a recipient of some major attention and press for the next little while.
But aside from the big PR win that Regeneron stock scored, there’s an even more important aspect of this story that shouldn’t be overlooked: the most powerful man in the world, when afflicted with COVID-19, used the company’s drugs as treatment.
Not only does that in and of itself bode well for the company, but it also means that the U.S. government may choose to support Regeneron Pharmaceuticals Inc in the future.
For instance, if the pandemic is going to last at least until next summer (which is the period most projections have pegged for a vaccine becoming widely available), then we’re going to see hundreds of thousands, potentially even more than a million, cases in the U.S. (and certainly globally) before that time.
In which case, if Regeneron’s treatment is considered to be the top of the line, well, then you can anticipate a huge demand for the drug.
And if we do end up seeing a huge demand for the drug, you can anticipate that revenue (and thereby share value) will also surge in tandem.
Regeneron stock is already up over 50% year-to-date, but I believe that in the next 12 months, if the above predictions pan out, we could see the company easily add another 50% gains to that number.
Chart courtesy of StockCharts.com
Now, I’d be remiss if I didn’t mention that this is a highly competitive segment of the pharmaceutical sector. As you’d expect, many companies are hungry to be the go-to provider of any coronavirus treatment.
Beyond the gains made in sales of their product, being the premier COVID-fighter would also be a huge PR win for the company, endearing many people to it. That kind of goodwill will have a lasting impact on the company’s reputation, as well as solidifying links to government buyers.
In other words, this is a once-in-a-lifetime opportunity for pharma stocks, and they know it.
As such, Regeneron stock is going to face a fair deal of competition in the coronavirus arms race.
While the company is clearly ahead at this moment, any investor who has played the pharma stock market before knows that this is by no means an industry free from volatility—quite the opposite.
So while there is great potential contained within REGN stock, there is also a good bit of risk should the company be beaten out (or should the drug prove to be less effective/have adverse side effects).
While things are certainly positive and bright for Regeneron stock right now, those who are looking for a stable investment in these unstable times are better served looking elsewhere.
We are all well aware of the pharmaceutical industry’s volatile nature. Trials can get very far before ending in total disappointment, often to the detriment of investors’ portfolios. So, there is volatility and risk in this sector. But the reward, well, that speaks for itself.
The first company to find a treatment or vaccine would see huge flows of capital into its coffers as it became a worldwide sensation overnight. Which would, in turn, help swell the REGN stock price.
It’s a risk vs. reward situation, for sure, but there’s reason to be confident in Regeneron stock.
With Trump running around endorsing the company (and serving as a living example of its restorative powers), you have the single best advertising campaign you could ask for.
On the flip side, competition is fierce in the sector.
Those who don’t mind a little bit of volatility in their portfolio might want to consider Regeneron stock.