Pharmaceuticals stocks and the related exchange traded funds are benefiting from the now-steady revenue stream provided by coronavirus vaccines, but with that priced into many pharmaceuticals equities, analysts and investors are looking for more.
Fortunately for investors considering ETFs such as the VanEck Vectors Pharmaceutical ETF (PPH), the 2022 outlook is bright, and that includes pharma companies generating strong cash flow. That could be supportive of boosting dividends and share buyback plans.
“We expect that vaccine manufacturers Pfizer/BioNTech (BNTX) and Moderna (MRNA) will again experience strong cash windfalls in 2022. Vaccines continue to play an essential role in the fight against the coronavirus as the emergence of new variants, including omicron, has reduced the effectiveness of antibody cocktail treatments, and oral antiviral supply is just beginning to ramp up,” according to Morningstar.
Pfizer accounts for nearly 5% of PPH’s weight, and it’s one of several of holdings in the VanEck ETF line-up that have some exposure to fighting the coronavirus, including vaccine production. COVID-19 is unlikely to be completely eradicated anytime soon, and some vulnerable groups are likely to need ongoing boosters, which could provide support for the PPH thesis. Pfizer is likely to dominate 2022 booster sales, according to pharmaceuticals industry analysts.
“When it comes to treatments, we’re above consensus for 2022 and roughly in line with consensus in the longer term. We think a certain number of high-risk individuals will continue to contract COVID-19 each year for the foreseeable future, requiring treatment. And given the uncertainty around COVID-19’s spread, we also expect there will be interest in maintaining stockpiles of treatments,” notes Morningstar.
Still, for the broader pharmaceuticals group to gain from the vaccine race, more participants need to make headway. This could be the year that happens.
“We expect to see more evidence that other technologies (viral shells at AstraZeneca (AZN) and protein-based vaccines from Sanofi (SNY) and Novavax (NVAX)) are capable of being quickly adapted as booster doses, similar to mRNA,” adds Morningstar.
AstraZeneca (NASDAQ:AZN) and Sanofi (NYSE:SNY) combine for 10.31% of PPH’s weight.
Oral anti-virals could also see wider adoption this year. That could potentially benefit Merck (NYSE:MRK) and Glaxosmithkline (NYSE:GSK). Those two stocks combine for almost 10% of the PPH roster.
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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.
