Why Pharma Stocks May Be the Best Play as We Near 2021

Pharma Stocks on the Rise

The number one priority of governments around the globe this year is to develop a COVID-19 vaccine. As a result, pharmaceutical stocks, a.k.a. pharma stocks, have seen huge gains due to their being pretty much designated as the best possible and most direct opponents to a coronavirus-dominated world forever more.

While companies like Moderna Inc (NASDAQ:MRNA), linked to a coronavirus vaccine, have surged in 2020, the true gains among pharma stocks in 2020 may actually be right around the corner.

Yes, there is intense pressure on all governments to find a vaccine in order to restore some semblance of normalcy to everyday life. That extends beyond just combating the disease; the entire global economy has been upended due to this virus. In fact, despite the stock market having long been insulated from the greater damages of COVID-19, we’re even seeing tech stocks and other safer ventures begin to feel the sting as the pandemic continues to present dramatic challenges.

But there is now, more than ever, pressure coming from the U.S. government in order to find a vaccine due to the U.S. presidential election.

President Donald Trump and former Vice President Joe Biden are mired in an increasingly tight-knit race. Should the Trump Administration find a way to release a viable vaccine before election day, this alone could sway the results.

Remember that the U.S. government has gone in big on pharma stocks, investing billions of dollars in order to speed along the process of vaccine development.

Moderna stock, in fact, first appeared on our radar after the U.S. federal government infused the company with $483.0 million in an attempt to help develop said vaccine—and it has even begun working with Moderna in-house to develop it. (Source: “Moderna Soars After $483 Million Covid-19 Agreement With U.S.,” Bloomberg, April 16, 2020.)

MRNA stock continued to impress after the company revealed that it had completed enrollment for a Phase 2 trial of the COVID-19 vaccine. (Source: “Coronavirus Vaccine Progress: Moderna Partners for Manufacturing Deal, More Trials to Start Soon,” Boston Herald, July 11, 2020.)

These two factors have helped propel Moderna stock to great heights in 2020. And if the company is able to develop a working vaccine, then you can expect greater gains on the way.

Chart courtesy of StockCharts.com

Considering MRNA stock has nearly doubled on just the promise of a COVID-19 vaccine, the actual development and implementation of the vaccine will likely cause the company to see even greater gains than it has already experienced, at least at first.

And don’t forget that world governments are already investing in vaccine production in anticipation of one being available in the near future.

The Canadian government signed two separate deals in order to provide the necessary millions of vaccines to its people. (Source: “Feds sign agreements with Pfizer, Moderna for millions of doses of COVID-19 vaccines,” CBC, August 5, 2020.)

The U.S. government, meanwhile, continues to spread money around in hopes of finding a vaccine, this time sending billions to overseas pharmaceutical companies. (Source: “European drugmakers Sanofi and GSK strike $2.1 billion deal with U.S. for a coronavirus vaccine,” The Washington Post, July 31, 2020.)

The billions the U.S. has dedicated to a vaccine have been aptly dubbed “Operation Warp Speed,” speaking to the desperation of the government (and, frankly, the human population of earth) to find a viable vaccine to ward off further damage from COVID-19.

And that brings us back to the U.S. presidential election.

Now, obviously, everyone wants a safe and effective vaccine; there aren’t a whole lot of coronavirus supporters out there.

But in the cynical world of politics, it’s impossible to divorce the good from the politically expedient. In other words, the Trump Administration has a huge stake in a vaccine being released within the next 50 days in order to help bolster Trump’s reelection chances.

That doesn’t meant that a vaccine will be released in that time, but it does mean that the U.S. federal government will be working overtime to deliver it in that time frame.

This offers us, then, our best chance at predetermining when a vaccine could be released. And, if you can invest in the right pharma stock just before a vaccine release date, well, let’s just say your portfolio is going to look mighty healthy.

And recent news has us believing that this is more than just conjecture; we may very well see a pharma stock producing a vaccine in the near future, if Biden and Trump are any indicators.

Biden’s running mate, Kamala Harris, has gone on record saying that she would be reluctant to take a vaccine rushed out by the Trump administration.

Biden, for his part, had a different answer for reporters over the weekend during a campaign stop in Pennsylvania.

“I would want to see what the scientists said,” Biden said, insisting that he would want “full transparency” from the administration about any potential vaccine.

Biden also said he is worried that “if we do have a really good vaccine people are going to be reluctant to take it,” because Trump “is undermining public confidence” in the process.

“If I could get a vaccine tomorrow, I’d do it,” Biden added. “If it cost me the election, I’d do it. We need a vaccine, and we need it now. As quickly as we can get it. We have to listen to the scientists.” (Source: “Biden, Trump battle over prospect of coronavirus vaccine delivered before Election Day,” NBC News, September 7, 2020.)

So, there are some indicators that Biden and Harris are preparing us for a vaccine release, maybe even trying to discredit it before it’s released in order to better their electoral chances. But, of course, they’re also not wrong that Trump could realistically push through an unsafe or ineffective vaccine in order to secure his electoral victory; politics is a dirty game.

Trump, for his part, has pledged to “produce a vaccine in record time.” (Source: Ibid.)

Whatever the outcome, we can comfortably project that there’s a very good chance some form of vaccine will hit the market near the end of 2020. And, in that scenario, you can expect pharma stocks to shoot up exponentially.

Even if the vaccine turns out to be a dud, we’ll likely see huge gains at the start that would allow investors to get in then and sell off in the next few weeks, netting huge gains.

Analyst Take

The race to find a COVID-19 vaccine is heating up, and as a result, pharma stocks that are connected to a potential vaccine are at their most potential-filled.

Investors who are able to predict and invest in the right pharma stock in anticipation of the vaccine are going to be among the most profitable in 2020/21. And with the U.S. presidential election just around the corner, now may be the time to strike.