There are multiple coronavirus vaccines on the market, and with the likelihood of booster shots increasing by the day, the revenue outlook for healthcare exchange traded funds, including the VanEck Vectors Pharmaceutical ETF (PPH), is improving.
PPH tracks the MVIS US Listed Pharmaceutical 25 Index and is home to 25 stocks, several of which are purveyors of coronavirus vaccines. That includes Pfizer (NYSE:PFE), PPH’s third-largest holding.
“The US Food and Drug Administration’s (FDA) full approval of the Pfizer (A/Negative)-BioNTech vaccine for individuals at least 16 years of age this week should support demand as it may lower inoculation hesitancy,” says Fitch Ratings. “Full FDA approval may also help justify more private employer vaccine mandates. Some states, however, are blocking government-entity mandates.”
Dow component Johnson & Johnson (NYSE:JNJ), another leader in the fight against COVID-19, has yet to approach the FDA for full approval of its coronavirus vaccine. Johnson & Johnson is the sixth-largest PPH holding, commanding a weight of 5%, according to issuer data.
Unfortunately, the virus isn’t yet vanquished, and as is being seen with the Delta variant, the coronavirus mutates and creates new strains. How long that will continue remains to be seen, but between new variants and the fact that boosters are required, PPH components are gaining a new revenue stream.
“Drug makers will likely continue to reap financial benefits from the vaccine as long as the virus continues to circulate,” adds Fitch. “Vaccine efficacy is less than 12 months, based on scientific data reported by manufacturers, as there is potential for mutations that may or may not be more contagious than the original strain. A large portion of the world’s population is also still unvaccinated.”
Additionally, there’s ample runway for some PPH holdings to grow sales simply because global vaccination rates are low. Just a third of adults worldwide have received at least one jab, while only a quarter are fully vaccinated, according to Fitch. COVID-19 vaccines are having a material impact for some PPH constituents.
“Aggregate vaccine sales generated by Pfizer, Moderna, Johnson & Johnson and AstraZeneca, the four largest coronavirus vaccine manufacturers, during 1H21 totaled $18.6 billion, according to an Axios report. The report projects combined worldwide sales will reach $60 billion for the entire year, with Pfizer accounting for more than half,” said Fitch.
AstraZeneca (NYSE:AZN) is PPH’s second-largest holding at a weight of 5.72%.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.