Bashing names that are up almost fivefold year-to-date, as is the case with iBio (NYSEMKT:IBIO), can be risky, but IBIO stock itself is risky as perhaps too much coronavirus enthusiasm is baked into the small-cap biotechnology name.
Underscoring the volatility associated with companies purporting to be on the cusps of cures or treatments for international pandemics, IBIO has more than quadrupled just this month, but the stock resides 63.53% below the 52-week high notched in early March.
Investors have been down this road with other small-cap COVID-19 plays. Take the example of Inovio Pharmaceuticals (NASDAQ:INO). That stock has more than doubled this year amid speculation the company could bring to market a coronavirus treatment, but don’t be seduced by those returns. At its 2020 apex, Inovio was a $19+ stock. It closed below $7 on a March 23.
A COVID-19 cure, at least for the moment, is one of those things that everyone wants, but no one can have because it simply doesn’t exist. The World Health Organization (WHO) is looking to change that, recently announcing a “megatrial” that combines several drugs – an HIV therapy, an Ebola treatment, remdesivir and a malaria drug.
Companies, including iBIO looking to treat the respiratory illness, face a vexing set of circumstances because the coronavirus is a new strain comparable to existing illnesses, but previously unseen in its current form.
“The complete clinical picture with regard to COVID-19 is not fully known. Reported illnesses have ranged from very mild (including some with no reported symptoms) to severe, including illness resulting in death,” according to the Centers for Disease Control and Prevention (CDC).
Important to IBIO Stock
For its part, IBIO is working on its coronavirus treatment, one the company swiftly developed and is hoping to earn four provisional patents for.
“iBio created its SARS-CoV-2 Virus-Like Particle (“VLP”)-based constructs in just a few weeks using its FastPharming System to produce the nanoparticles in, and purify them from, plants,” according to a statement issued by the company.
Predictably, IBIO executives are optimistic about the therapy, but these things take time. The Food and Drug Administration (FDA) may be apt to speed up the approval process for any coronavirus treatment, but it’s still not going to happen in a day, a week or even a few weeks. In fact, even the rosiest of assumptions allot for months if not a year passing before a credible COVID-19 cure is found.
With a market capitalization of just $114.5 million and a meager price tag of a mere $1.24 as of the March 23 close, IBIO stock appears to be reflecting investors’ apprehension that this company will imminently introduce a COVID-19 cure. In other words, recent price action suggests this small biotech is unlikely to deliver the coronavirus goods anytime soon.
Bottom Line on IBIO Stock
Although the stock sank almost 9.50% on the news, somewhat lost in all the coronavirus commotion is that iBio is the recent change in leadership with Thomas Isett replacing Robert Kay as CEO.
It’s not unusual for companies to switch chief executives. It happens all the time, but the optics of a small-cap healthcare company making a leadership change amid an international pandemic it’s supposedly trying to solve are giving some investors pause.
Over the near-term, IBIO is likely to be one of those names that seduces speculators, but many investors would be better suited by embracing larger steadier healthcare names until the company proves there’s some meat on its bones.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.