Searching for treasure in pharmaceuticals

Equity markets love treasure hunts, and love to bet on who will find the pot of gold first. Will there be a clear winner when it comes to a COVID vaccine?  

Pharmaceutical companies that release positive phase I data get rewarded with a large stock price increase, even though the only thing the data is telling you is that it does not kill people. This quest for a COVID-vaccine is a race with an extremely uncertain outcome. There might be one winner, two winners or none. The winner(s) might be able to sell billions of vaccines in the next two years or might have a recurring but low margin business just like with flu vaccines.

In such an uncertain environment, we prefer not to focus solely on the potential winner, and to not only count on the best case scenario emerging, but to look at the picks and shovel suppliers. In any gold rush, the picks and shovel suppliers always make money. We prefer healthcare companies that provide the necessary diagnostics, do the COVID-testing, provide AI –tools for DNA research, or are the outsourcing partner for the clinical tests.

Not reaching the best case scenario of defeating COVID would also mean that the leisure sector, from sporting events to cruises, would need to permanently adapt to changing social behavior. The way we live, work, manufacture and consume healthcare services will become even more digital than it already is.

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