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What does the race to a COVID-19 vaccine mean for investors?

06/10/2020

For many countries across the globe, it is believed that the long-expected second wave of COVID-19 has arrived. With case numbers increasing and the number of deaths once again rising, the race is on for pharmaceutical companies around the world to bring a tried and tested vaccine to market to prevent as much further damage from the pandemic as possible. 

Senior health officials in the UK have suggested that a vaccine could be available as early as spring 2021, with results from clinical trials by the end of this year. A number of the companies currently conducting Phase 1-3 trials are publicly listed, and some, such as Moderna and Vaxart Inc. – have seen jumps in share prices. 

Some investors may be considering investing in these companies in light of their share price spikes – but can the winners in the race to a successful vaccine really be predicted? 

The companies to watch

Various sources have listed pharmaceutical companies that investors should watch – like these. These lists are generally based on which companies are furthest ahead in their clinical trials – and so, to some, may seem like a reliable way of establishing which investments are most likely to bear fruit. However, even a successful Phase 3 trial does not necessarily mean that a vaccine will be approved: after this, it must still go through expert review and licensing.

A world of uncertainty

Sources claim that over $100bn of investors’ money is riding on the approval of a COVID-19 vaccine, suggesting that the stock market is placing a great deal of value on those vaccines that are currently in development. However, Hargreaves Lansdown describes picking a winner as “the race you’ll struggle to win”. They state that even expert virologists cannot predict which company will come out on top: with high costs, a high likelihood of failure, and the fact that some of these companies will be making little to no profit, they believe that investing in a company simply because you believe it is likely to find a COVID-19 vaccine is a bad idea.

Thinking long term

Instead, Hargreaves Lansdown encourages people to think long term – using the principles of top investor Warren Buffett and deciding whether a pharmaceutical stock you plan to invest in now would be one that you would be happy to invest in long term. 

 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

 

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