AstraZeneca and GlaxoSmithKline – the Covid-19 vaccine frontrunners to watch

Around the world, pharmaceutical companies and governments are working at record speed to develop a vaccine for the novel coronavirus. There are currently more than 150 potential vaccines in development, with high hopes that an effective product can be introduced to the market within the next year.

The demand for a vaccine has increased since lockdown measures were brought to an end over the summer. With millions of people back at work, children back at school, and services reopening to the public, the threat of the virus sweeping through the population is at its greatest since the peak of the pandemic in the spring.

With pressure mounting, two UK-based biopharmaceutical firms have emerged among the frontrunners in the race to develop a vaccine: AstraZeneca (LON:AZN) and GlaxoSmithKline (LON:GSK).

Both companies have made significant progress in recent months. Despite a brief setback due to an adverse neurological reaction from a volunteer, AstraZeneca and Oxford University’s joint venture is already well into clinical trials, and although GlaxoSmithKline has only just begun its first human study, the unique formulation of its proposed vaccine makes it potentially more effective than others in development.

So, which of the two should investors consider tucking their cash into?

AstraZeneca and Oxford University

The collaboration between Cambridge-based AstraZeneca and the University of Oxford is already a frontrunner in the race to develop a vaccine.

Its proposal, named ChAdOx1 nCoV-19, is currently undergoing Phase Three clinical trials on human volunteers, which will determine whether the vaccine has the same effect on humans as it did on laboratory animals during earlier studies.

A number of governments have already made their faith in AstraZeneca’s vaccine clear, with the UK, USA and India pre-ordering a total of more than 2 billion doses.

Despite a week-long setback after a volunteer fell ill with a neurological condition called ‘transverse myelitis’, independent regulators determined that the trial was safe to resume. The volunteer is expected to make a full recovery.

AstraZeneca’s share price wavered when the project was put on hold, with investors (understandably) fearing that their hopes that a vaccine is on the horizon would be dashed.

Shares were down a hefty 8% on the morning of the company’s announcement, but quickly recovered once the trials were given the go-ahead to resume.

Since then, AstraZeneca’s shares have gained on renewed optimism. On Wednesday afternoon, they were up 2.49% to 8,794.00p, and if all goes to plan then they are likely to keep going up.

The company has enjoyed a surge in investor interest over the course of the year, with a 24.67% increase in its share price in the last 6 months alone, and a decent dividend yield standing at 2.48%.

Assuming that AstraZeneca’s vaccine avoids any further obstacles, it may well offer a prime investment opportunity for those looking to capitalise on the win-win of a successful vaccine and inviting returns.

GlaxoSmithKline and Sanofi

Brentford-based GlaxoSmithKline teamed up with French pharmaceutical firm Sanofi (EPA:SAN) back in April, both boasting a unique take on vaccine composition that has since given the collaboration a competitive edge.

Sanofi has offered its experience with protein-based vaccine development to the project, already boasting an impressive track record as the “leading influenza vaccine producer, delivering nearly 200 million vaccines, 40% of all doses worldwide”.

GlaxoSmithKline brings its immune system-boosting adjuvants to the table, which have also proved effective in trials for the standard influenza virus. The hope is that the addition of adjuvants to the vaccine could provide more effective and longer-lasting protection against Covid-19 than its competitors.

Together, although Sanofi and GlaxoSmithKline might be able to produce a more potent vaccine, their trials are notably behind that of AstraZeneca’s.

Human trials only began this month, and results are not expected until December. While this means that a vaccine may be able to be rolled out in the first half of 2021, this estimate is admittedly a little on the lenient side, and AstraZeneca’s vaccine still has the edge in terms of a release date.

That being said, investors looking to put their money behind a project which might yield better results further down the line should not be discouraged.

Although GlaxoSmithKline has seen its share price fall almost 10% over the past 3 months, this is at least partly due to the – undeserved – but nonetheless dwindling interest as competitors’ vaccine programmes overtake them.

The US government has not been dissuaded just yet, with a promise of a minimum of $2.1 billion to “fund development and clinical testing, as well as manufacturing” for GlaxoSmithKline’s project.

Assuming clinical trials prove to be a success, the US has already put in an order of over 100 million doses.

So while it may be easy to be dissuaded by GlaxoSmithKline’s recent performance on the stock market, investors certainly should not rule it out completely.

One of its major competitors, AstraZeneca, has already faced a concerning setback which – although having been reviewed by an independent safety body – may cause problems further down the line once mass vaccination is on the cards.

The real attraction of GlaxoSmithKline’s vaccine, however, is its unique formula. The combination of protein-based technology and adjuvants could produce a vaccine that is far more effective than the current offerings, providing potentially much stronger inoculation against coronavirus, and therefore a more successful vaccine overall.

GlaxoSmithKline has seen its share price climb 1.47% on Wednesday afternoon, bucking the trend of a week-long depression of 2.96%, but still sits tight on a sunny dividend yield of 5.30%.

Why you should invest in a vaccine

Chris Beauchamp, chief market analyst at trading company IG, has some advice about why investors should consider tapping into the race to develop a vaccine:

“Pharmaceutical stocks remain popular with investors, and rightly so, thanks to their long-term revenues and excellent dividend yields. In a world where yield is even harder to come by, such stocks will maintain their place at the top of watch lists”.

However, Sheena Berry – healthcare analyst at Quilter Cheviot Investment Management – has a word of caution for eager investors:

“The first companies to develop available coronavirus vaccines may not necessarily be the long-term winners”.

Beyond the obvious benefit of a successful vaccine, Raconteur points out that investors looking for “stocks with a conscience” need not look any further than the top pharmaceutical firms.

The coronavirus pandemic has “accelerated” the drive towards ESG stocks, of which pharmaceuticals make up a significant portion, and investors are increasingly contributing their cash to projects which are not only profitable, but are designed with improving people’s lives in mind.

For a look at other ESG funds, check out this list of 3 of the most promising offers on the market.