Given the wild swings in the markets, it’s been a crapshoot for those looking to find profitable names during this coronavirus pandemic. That said, the pharmaceutical sector, particularly companies that are involved in mitigating the spread of Covid-19, have enjoyed significant enthusiasm. One such firm is AIM ImmunoTech (NYSEAMERICAN:AIM). After years of disappointing performances, AIM stock is seemingly in the middle of a resurgence.
If you look at the company’s website, though, it’s not immediately clear why AIM stock has skyrocketed. ImmunoTech’s claim to fame is its flagship drug Ampligen. Designed for the treatment of severely debilitated patients with chronic fatigue syndrome, doctors have prescribed Ampligen for addressing symptoms associated with various cancers. Indeed, before this pandemic, industry insiders regarded ImmunoTech as largely an oncology play.
However, the coronavirus changed everything. In early March, Japan’s National Institute of Infectious Diseases began experiments with Ampligen as a potential Covid-19 treatment. According to ImmunoTech CEO Thomas K. Equels, the drug offers “excellent antiviral activity.” Because no Food and Drug Administration-approved treatment for Covid-19 exists, the potential for Ampligen helped lift AIM stock.
Yet with shares up 262% on a year-to-date basis, prospective buyers are wondering if the low-hanging fruit isn’t already gone. It’s a fair question. Prior to the outbreak, ImmunoTech consistently failed to attract bullish sentiment. Additionally, when this pandemic fades – and it will fade – you’re left with an underlying business that hasn’t performed to expectations outside of a crisis.
Also, I have to wonder if there’s a real market for Ampligen. Frankly, I believe most people are looking for a coronavirus-specific drug, not something that involves cancer. But first, let’s address the immediate vulnerability: the time frame.
AIM Stock Is Late to the Scene
On Thursday, the U.S. hit an undesirable benchmark: it now leads all countries in confirmed coronavirus cases. You know that statement by President Donald Trump that everything’s under control? Yeah, that didn’t age well.
But I’m not blaming any one person for this devolving crisis. From all corners of the government, we’ve had confusion and indecisiveness. Even when it came to signing the historic $2 trillion stimulus package, we had to endure Washington hissy fits. Speaking honestly, some actions and statements have left me embarrassed as a (taxpaying) American citizen.
But despite the ugly headline numbers, in terms of trends, we’re actually moving in the right direction. Don’t get me wrong – I’m not trying to minimize the over 17,000 new cases in a 24-hour period. What I’m saying, though, is that the daily growth rate has declined over time.
Early this month, it wasn’t unusual to see the daily rate of change hit or exceed 40%. In the five days between March 18 through March 22, the daily rate averaged 39.5%. But in the three days between March 24 and March 26, the average slipped substantially to 25%.
Of course, that’s small comfort to hard-hit areas in New York. Nevertheless, it demonstrates that the unprecedented actions of several states to issue mandatory stay-at-home orders have started to decelerate the infection curve. Of course, it’s nowhere near flat but we’re getting there.
And that poses a risk to AIM stock. While I appreciate the tremendous efforts that ImmunoTech forwarded, it’s just coming too late for major developed countries. By the time approvals are dished out, most heavily impacted nations today should see their case growth diminish.
Also, keep in mind that Ampligen is an early onset solution, not a full-throated treatment.
ImmunoTech Has an Image Problem
Setting aside the timing issue, another challenge for ImmunoTech is Ampligen’s core usage. As I mentioned above, the drug is used for addressing cancer-related symptoms. This being the case, I’m not sure if patients would be gung-ho to use it unless they’re in dire straits. And if they were in such a desperate situation, they wouldn’t use Ampligen.
Again, it’s an early onset solution. For those that are already suffering severe Covid-19 symptoms, your best bet may be a drug from Gilead Sciences (NASDAQ:GILD) or another established company.
However, this isn’t to say that AIM stock is completely without merit. While we’re naturally focused on ourselves, other countries like Ireland, Denmark and Malaysia are just starting their coronavirus nightmare. So, a potential approval for Ampligen could prove profitable.
Ultimately, though, I’m skeptical of ImmunoTech’s longer-term viability. But if you want to take a gamble, it’s not totally irrational. Just be sure to have your finger on the “sell” button.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.