On Monday, one week after Pfizer Inc. (PFE) and BioNTech (BNTX) announced the impressive results of their vaccine candidate, Moderna Inc. (MRNA) piled onto the vaccine optimism by revealing that their vaccine was 94.5% effective.
But unless you were already holding shares of MRNA, you likely missed a lot of the potential profit after the announcement was made.
But don’t start kicking yourself just yet. The massive scope of the efforts required to defeat this pandemic is going to create more opportunities for you to cash in.
And I’m not just talking about the two other vaccines close behind in testing, one from AstraZeneca plc (AZN) and Oxford University and the other from Johnson & Johnson (JNJ), which may be in for their own spikes depending on their respective test results.
That’s where the 15 years I spent in the field as a chemical engineer give me insights that many other analysts simply don’t have.
There’s another group of stocks that will benefit from the rollout of multiple vaccines; and they’re the ones that most investors are missing.
Their names may not show up in vaccine headlines. But they will be crucial in getting these vaccines to everybody.
Grab these stocks now, before the rest of the market catches on…
Vaccine Distribution Will Give These Retailers a Boost
Pfizer, AstraZeneca, Johnson & Johnson, Moderna, and BioNTech all get the credit for the push for a Covid-19 vaccine, and deservedly so. With their university and hospital partners, they most likely will have developed not one but four viable candidates for a vaccine in under a year.
Never before have we been able to get that done even for a single vaccine candidate. It’s truly an astounding achievement.
But when it comes to producing, packaging, shipping, and administering the shots, they won’t be working alone. A number of other companies have already been contracted to work behind the scenes to get the scientific achievements of the vaccine developers into our hands.
Some of them have already started.
For example, most of these big vaccine developers are part of the U.S. federal government’s Operation Warp Speed (OWP) program to fund and accelerate research into a Covid-19 vaccine.
But as part of OWP, the Department of Health and Human Services has already signed deals with several companies to actually give the shots to people in nursing homes as well as to the general public. These include several regional and national pharmacy and grocery chains, my favorite picks among these are Walmart Inc. (WMT), CVS Health Corp. (CVS).
CVS has more to gain directly from the vaccine distribution, but has to overcome the Amazon Pharmacy headwinds. But WMT has just broken out above it’s all-time closing highs and is poised to run higher with strong holiday sales:
But just getting vaccines to these pharmacies and grocery stores is going to be a huge challenge in and of itself.
And it’s with these pick and shovel plays that we’ll find some big hidden profits.
These “Behind the Scenes” Vaccine Stocks Will Also Be Winners
Take the vaccine from Pfizer and BioNTech, for example. It may end up being the first one out of the gate, but it has to be stored at a staggering -70 C.
That’s -94 F.
The ultra-cold deep freezers that can reach those kind of temperatures only exist at large hospitals, some universities, and specialized research labs.
No FDA-approved drug has ever required storage at temperatures that low, so no pharmacies or community hospitals, not to mention clinics, have the capacity for it.
That’s going to be a huge issue. The vaccine can survive surrounded by dry ice for 15 days, so Pfizer is planning to ship it that way. This will require special-made boxes, huge amounts of dry ice, and newly developed, always-on GPS trackers and thermometers for each package.
And a “control tower” that monitors each package in real time, intervening if it looks like a shipment is about to spoil.
Once a shipment gets to a pharmacy or the like, the vaccines will only last five days in a fridge. So every dose has to be used within five days.
That’s going to be next-to-impossible for smaller hospitals, especially in rural areas where people live far apart.
Now, Pfizer is planning to handle most of this in-house, with United Parcel Service Inc. (UPS) and FedEx Corp. (FDX) doing the shipping. UPS is already building two huge deep-freezer facilities, one in Kentucky and one in the Netherlands, for stopover storage of Covid-19 vaccines. This graphic from the Wall Street Journal shows how important such new cold storage is in the race to get vaccines to the public:
I like both UPS and FedEx for their vaccine involvement and because the shipping industry, especially here in the U.S., remains under capacity heading into the busiest shipping season of the year.
But even before vaccines are shipped, they have to be packaged. And that may be the biggest remaining challenge to reducing the vaccine distribution timeline.
The Pfizer vaccine, like all Covid-19 vaccines other than Johnson & Johnson’s, require two doses per person, spaced a few weeks apart.
So take all the difficulties in making the vaccine, shipping it, and storing it – and then double them.
As such, the Pfizer vaccine may well end up being used best on healthcare workers and others at very high risk, who are likely to be close to a research hospital that has the ultra-cold storage that’s needed.
For others, especially in remote or rural areas, a vaccine that’s easier to ship and store is going to be the key.
As luck would have it, Moderna’s vaccine lasts 30 days in a regular fridge. AstraZeneca and Johnson & Johnson also require only standard refrigeration. That’s a much easier problem to solve.
In fact, it’s already been solved. Medical-grade shipments, not to mention grocery deliveries, are regularly made with refrigerated trucks, trains, ships, or airplanes.
Johnson & Johnson has another leg up here, because it’s the only vaccine close to being ready that only requires one shot per person, cutting all these issues down by half.
Even so, we’re going to need hundreds of millions of doses of all three – for just America alone. To inoculate the whole world, it will take billions.
Moderna, AstraZeneca, and Johnson & Johnson will make many of them, of course.
But the one “behind the scenes” that’s helping the most and providing the most vaccine related services is a little-known drug services company that specializes in getting drugs from the production vat and into the hands of healthcare workers.
Catalent Inc. (CTLT) is a company that specializes in manufacturing and packaging drugs for many companies. This specialty niche makes Catalent what is known in the industry as a contract development and manufacturing organization.
And importantly for us, it has already been contracted to fill vials and package them together for Moderna’s vaccine. To start with, the deal is for 100 million doses, but the contract allows the companies to grow that number, which is very likely to happen.
In addition, Catalent, is also contracted to help produce hundreds of millions of doses of both the AstraZeneca and the Johnson & Johnson vaccines. CTLT not only has contracts with three of the four Operation Warp Speed companies, a recent statement says they are “working with over 40 customers on multiple COVID-related antivirals, vaccines, diagnostics and treatments across its network.
I believe that CTLT is a good intermediate to long-term stock play for your portfolio. And for an even quicker profit, I believe the company has significant upside as the packaging and distribution problems come to the fore in the coming weeks. For that coming surge, you can consider buying CTLT January 15, 2021 Call options for $5.00 or less per contract. Protect your trade by exiting the next trading day after any close that is below 50% of the premium paid for the calls. Take profits at 100% gain.
Great trading, stay safe out there and God bless you,
— D.R. Barton, Jr.