Right from the get-go, the bull and bear case for iBio (NYSEAMERICAN:IBIO) is readily apparent. On one hand, IBIO stock skyrocketed this year due to the underlying company being one of the competitors to produce a solution for the novel coronavirus.
On the other hand, the small pharmaceutical company hasn’t been relevant for years. Put another way, you don’t want to end up holding the bag.
Judging from the history of IBIO stock, holding the bag seems a more likely scenario than attaining incredible wealth. Shares ebbed and flowed from extreme heights to devastating lows, aligning with prior health scares. Obviously, prospective buyers worry about a repeat scenario. Therefore, many if not most of my InvestorPlace colleagues have urged caution toward this name, and I’m no exception.
At the same time, this time could be different for IBIO stock. Though I hate to use that phrase, Covid-19 has shattered the pharmaceutical paradigm. Eli Dourado, senior research fellow at The Center for Growth and Opportunity at Utah State University, states:
One can hope that, given recent events, we will invest more resources with more urgency in biotech to be able to better respond to future biological crises. This could lead to a boom in new biological understanding and ultimately in new cures in the next decade. By removing medical regulations like restrictions on medical license portability, we have become more able to respond to the crisis.
Because of the unprecedented devastation of the coronavirus, future government policies will likely focus on mitigation. And that means enhanced incentives for all pharmaceuticals on the frontlines of infectious disease warfare, from giants like Gilead Sciences (NASDAQ:GILD) to minnows like Inovio Pharmaceuticals (NASDAQ:INO).
Economic Devastation a Strange Catalyst
But within this total cost picture of the coronavirus, the most disruptive – as I’ll argue below – is the economic component. As Dourado states, we need a “…credible public health response to return robust growth to the economy.”
Unfortunately, that growth may not come for some time. That’s because we have expended far too many resources too quickly. In doing so, we prevented one crisis but facilitated another one which could be much more calamitous.
At time of writing, nearly 48,000 Americans have perished from Covid-19. Utilizing this figure, I multiplied it by the average salary in the U.S. (roughly a little over $56,000) and by an assumption of 40 working years. Then, I adjusted down the total to account for the fact that most Covid-19 victims are significantly older and therefore, on paper, have little to no economic value.
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With this very rudimentary method, I calculated that over four decades, the current human losses translate to an economic impact of $32.3 billion.
Interestingly, if we assume the government’s worst-case scenario for coronavirus-related deaths (1.7 million fatalities), we would incur an economic impact of $1.15 trillion over 40 years.
Of course, these are awful costs that represent real human pain. But over four decades, the costs are manageable. Instead, what we have done is, at a minimum, spent $2 trillion to support the economy during this unprecedented crisis. Combined with other mitigation efforts and large-scale opportunity costs, we could be talking about several more trillions.
Thus, in the worst situation, we would have spent multiple trillions to save one trillion. Under any other circumstance, this would be considered a disastrously stupid economic decision.
But if a pharmaceutical firm could change this narrative positively, it would have a substantially asymmetric impact; hence, the speculative interest toward IBIO stock.
Great at Doctoring, Bad at Chess
Prior to this pandemic, I’ve never heard of Dr. Anthony Fauci. Now, he has become the face of the coronavirus treatment. Though I respect his medical advice, I’m almost certain that he stinks at chess.
Why? When you watch chess masters at their craft, they are never afraid to make tough decisions. In other words, nobody wins a match with all their pieces on the board – quite the contrary.
In my opinion, Fauci has undue influence on our national policies. At a certain point, President Trump must brush him aside and act as the commander-in-chief. That means making tough decisions. If that involves knowingly sacrificing a million Americans to save the rest of the country, so be it.
No one said this job would be easy.
Simultaneously, the federal government did make it easier for pharmaceuticals to advance quick solutions for infectious diseases. And that’s why IBIO stock may continue to see upside momentum. If any one of these mini-pharmas could come up with a viable therapy, the current or future administrations can have their cake and eat it too.
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.
