Rolls-Royce: Here’s what I think shareholders should follow next after the Pfizer news

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Rolls-Royce (LSE: RR) shareholders recently received some good news, thanks to the pharmaceutical sector.

Although a vaccine hasn’t been approved, the latest data from a joint collaboration between Pfizer and BioNTech SE is encouraging. According to interim analysis from a phase 3 study, Pfizer’s Covid-10 vaccine candidate was over 90% effective. Per the study, there were also no serious safety concerns observed to date.

Pfizer is on track to potentially bring the vaccine to the market. The company expects to submit the vaccine candidate for approval from US regulators in the third week of November. In terms of manufacturing, Pfizer expects to produce 50 million vaccine doses this year and up to 1.3 billion doses next year. 

Because the effectiveness for vaccines for many other ailments are not very high, expectations for an initial Covid-19 vaccine weren’t very high either. The effectiveness of the vaccine for influenza is only around 40%–60% effective, for example.

But given the vaccine candidate data was better than expected, many travel-related stocks rallied on the news. With its exposure to the airline industry, Rolls-Royce surged substantially as well.

I think the effectiveness of other vaccine candidates will be important for Rolls-Royce stock

I think another event Rolls-Royce shareholders should follow is the effectiveness of other Covid-19 vaccine candidates. 

Because Pfizer and BioNTech SE can only produce enough potential vaccines for a fraction of the demand by the end of next year, the efficacy of other potential vaccines will also be important. 

If other potential vaccine candidates that are being pre-made are more effective, I think it’s good news for the world. It would mean more doses available to distribute earlier and the overall effectiveness of the vaccines distributed could be higher. In that case, I think the world could return to normal faster. Demand could recover faster too. 

If demand recovers faster, I believe Rolls-Royce could benefit, with more potential sales. Also, if the market expects the world to return to normal faster, I think the sentiment around Roll-Royce could benefit as well.

In terms of other Covid-19 vaccine candidates, I think the Pfizer news is also good news. According to the New York Times

Pfizer and BioNTech’s vaccine causes our bodies to make a viral protein called a spike. A number of other vaccines deliver the spike protein into the body, or just a fragment of it, that triggers the immune system to recognize it… If the spike protein prompts a strong protection to the coronavirus, then all of these vaccines might also deliver encouraging results in the months to come.

There could be a fair amount of Covid-19 vaccine candidate data for Rolls-Royce investors to digest in the months to come. Currently, there are around 10 Covid-19 vaccine candidates in late stage trials around the world. 

Regardless of what happens in the next few months, I’m looking at Rolls-Royce as an attractive long-term investment option, given the secular growth in air travel. I also like that Rolls-Royce has limited competition given the difficulty of producing world-class jet engines. 

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Jay Yao has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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