In late November, iBio (NYSEAMERICAN:IBIO) stock traded at 11 cents per share. It closed at $1.60 on Friday.
IBIO stock isn’t the only equity of its kind whose stock price has surged massively. The company is looking to develop a vaccine for the coronavirus, and the stocks of similar companies have soared. Novavax (NASDAQ:NVAX) is up over 150% so far this year. Vaxart (NASDAQ:VXRT) has gained more than 400% in 2020. Inovio Pharmaceuticals (NASDAQ:INO) at one point had risen more than fivefold in barely a month before retreating; it’s still risen more than 300% from its 52-week low.
Nano- and small-caps aren’t the only stocks of that type rising. Gilead Sciences (NASDAQ:GILD) has caught a bid on hopes its anti-viral drug, remdesivir, will serve as both a treatment and a prophylactic drug for the new virus.
The gains have made some traders who didn’t enter at the top quite a bit of money. But history suggests the rallies of iBio and the other names will lose long-term investors about the same amount.
IBIO Stock Has Been Here Before
Back in 2014, iBio rose over 600% in two months. The catalyst then was similar to the current one.
At that time, it was the Ebola virus that was causing fear among consumers and greed among speculators. iBio offered to help the federal government develop a vaccine, causing its stock to soar.
The end of the rally came quickly, however. By January, the gains were pretty much gone, and IBIO stock was trading below 50 cents. The stock has not actually gained ground since then. As a result of a 1-for-10 reverse split in 2018, shareholders actually have lost most of their investments from the post-Ebola-hype lows, even after the recent rally.
It’s certainly not surprising that the stock tumbled to a market capitalization as low as $10 million last year. iBio made apparently minimal progress in developing a vaccine. The word “Ebola” isn’t even mentioned in any of the company’s recent Form 10-K filings with the SEC.
In fact, iBio hasn’t made much progress on anything. Its revenue in fiscal 2019, which ended on June 30, was just over $2 million. The company reported a net loss of $17.8 million and burned through $14 million of cash. Consequently, the company had to sell a package of stock and warrants in October for just 20 cents each. Only the recent rally allowed the company to cancel its plans for another reverse split.
Other “Hot” Names Have Had Similar Journeys
That type of story, however, isn’t unique to iBio. The stock of Vaxart’s predecessor company, Aviragen Therapeutics, spiked around the same time in 2014. But its gains faded, Aviragen merged with Vaxart (and kept its name), and the combined company executed a reverse stock split in 2018.
At its 2014 highs, Inovio had risen more than 500% in a year. The stock would decline steadily for the next five years, eventually ceding all of its gains before the recent coronavirus-driven rally.
Recently, the gains of many of these stocks have been fading already. In most, if not all, of these cases, history will repeat itself over the long term.
Why iBio Could Succeed
To be fair, it’s possible this time will be different for iBio. It’s collaborating with privately held Chinese company Beijing CC-Pharming in an effort to develop a vaccine for the coronavirus . iBio’s contribution won’t be the vaccine itself, but rather its technology for producing the vaccine in quantity.
iBio uses a relative of the tobacco plant as a “bioreactor.” If CC-Pharming can find a vaccine, iBio can quickly grow the plants needed to produce massive quantities of that vaccine in a short amount of time.
But there are many roadblocks along the way — and not much evidence to suggest that the partnership will succeed. The likes of Gilead and even Inovio have more cash and resources to tackle the problem. There’s little public evidence that CC-Pharming has any technological edge. iBio has pivoted to being basically a contract manufacturer, but its $2 million of revenue suggests little progress on that front and little reason to believe it will be a key part of the industry’s response to the coronavirus.
At the least, investors should know what they’re in for when it comes to iBio. And they should remember that only a handful of companies, and maybe just one, will truly “win” when it comes to coronavirus treatments and vaccines. If iBio is a member of that select group, IBIO stock will soar. History suggests that is a giant “if.”
Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. As of this writing, he has no positions in any securities mentioned.