iBio (NYSEMKT:IBIO) is a nano-cap bio-pharmaceutical company which uses a technique called FastPharming to develop antibodies, other therapeutic proteins and vaccines from plants. It’s an interesting concept (and a compelling COVID-19 play), and one reason IBIO stock is up 500% year-to-date.
Before financial markets across the globe tumbled on concerns that COVID-19 will bring the global economy to a screeching halt, and some investors have rushed into “coronavirus stocks,” which stand to benefit from the spread of the coronavirus (and coronavirus hysteria) iBio was just an “OK” stock.
IBIO stock exploded higher in 2020 because the company is working on a coronavirus vaccine. The hope is that, if this vaccine passes clinical trials and becomes a product in 2021, it will generate huge amounts of revenue for this tiny, $100 million company.
Will that happen?
I have my doubts, and so I think investors should be cautious when looking at IBIO stock. Shares may continue to stay hot so long as COVID-19 spreads. But, once this spread stops (and inevitably, it will) this stock looks susceptible to give back all of its gains.
COVID-19 Is a Temporary Problem
The novel coronavirus outbreak is a big, serious, and scary thing. It has already infected over 100,000 people across the globe. When all is said and done, that number could easily rise to 200,000 or more. At the same time, it’s killed over 4,000 people, and that number could wind up being 5,000 or 6,000-plus.
Governments across the globe should not take this issue lightly. Nor should consumers. In fact, the more serious they treat the issue today, the better off everyone will be as a result.
But, COVID-19 is still just an epidemic/pandemic. Like all other epidemics/pandemics before it, this too shall pass.
Strict quarantining measures in South Korea and China have all but entirely stopped the spread of the virus in those countries. That only took a few months. Warmer weather come April or May should also help slow the virus down (if not entirely kill it). Multiple vaccines have already been created, and those vaccines are now going through testing, with products likely widely available in 2021.
In other words, it looks increasingly likely that the global coronavirus outbreak will start to slow in April, and potentially come to a halt in May or June. The virus may stick around for longer than that. But, come 2021, we should have a vaccine to fight it.
So, as scary as COVID-19 is, it’s also temporary.
iBio Is Not a Sure-Fire Success
COVID-19 being a temporary problem is not a good thing for IBIO stock.
Several biotech companies have rushed to develop a coronavirus vaccine or treatment in the past month. Many have come up with potential solutions. Those solutions are now going through clinical trials.
In other words, iBio is not unique in working on a COVID-19 vaccine. Everyone else is doing it, too. And it’s far more likely that the company that actually creates a vaccine which is widely used in 2021, will be a big biotech company with more resources, like Gilead (NYSE:GILD).
So, iBio is anything but a sure-fire success when it comes to making a bunch of money off a COVID-19 cure. In fact, the chances that happens are quite slim, in my opinion.
From this perspective, the big gains in IBIO stock are being fueled by investor hysteria. That is, investors are seeing stocks fall left and right, they are quickly looking for any and all stocks that could actually win from coronavirus, and they are rushing into those stocks to steady their portfolios, without really considering the fundamentals.
Once the virus stops spreading, this hysteria will stop. When it does, IBIO stock looks susceptible to give back all of its gains.
Bottom Line on IBIO Stock
I understand the attraction of piling into coronavirus stocks at this point in time. After all, they are the only stocks in the market that are going higher right now.
But, most of these plays are “get-in, get-out quick” plays. They aren’t solid long term investments. So, for long-term investors, shying away from highly speculative coronavirus stocks like IBIO is the best move.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he did not hold any positions in any of the aforementioned securities.
