As you know, the novel coronavirus has been an equal opportunity destroyer of earnings and revenue streams. But if one subsegment has enjoyed a benefit, albeit a cynical one, it would have to be the biotechnology and pharmaceutical space. Non-mainstream companies like AIM ImmunoTech (NYSEMKTS:AIM) have suddenly found themselves on the forefront. As a prime example, AIM stock has jumped 348% on a year-to-date basis.
To be fair, the sentiment surge isn’t completely without justification. Several companies, including big pharmaceuticals like Gilead Sciences (NASDAQ:GILD) down to smaller outfits like Moderna (NASDAQ:MRNA), have forwarded either treatment or vaccine candidates. Yet to date, none of these solutions have been proven clinically effective through advanced trials. Mainly, this is because we still have much to learn about the novel coronavirus.
Due to this ongoing race, smaller firms like AIM ImmunoTech have an outside shot of providing a viable solution. Specifically, AIM’s flagship drug is Ampligen, which is primarily formulated to address myalgic encephalomyelitis (ME) and chronic fatigue syndrome (CFS). However, Ampligen may have some efficacy toward mitigating fatigue-related symptoms of Covid-19; hence, the excitement over AIM stock.
At the same time, no one wants to hold the bag on a speculative penny stock. And that’s exactly what AIM was prior to this pandemic. As late as December 2019, shares were trading around 40 cents per share. As well, it’s not like AIM stock has been a bastion of stability in the new normal.
So, how should investors approach AIM ImmunoTech? Here are two pros and two cons to consider.
Pro: AIM Stock Can Benefit from a Covid-19 Niche
As I mentioned above, ImmunoTech’s Ampligen may have some mitigatory effect on certain Covid-19 patients. According to CEO Tom Equels, his organization plans on investigating “how Ampligen can be of service should there be a surge of COVID-19 induced chronic fatigue cases worldwide by targeting COVID-19 induced severe chronic fatigue in early onset patients.”
Clinical evidence suggests that bulls have some justification in their optimism toward AIM stock. During the SARS epidemic of the early 2000s – which was also caused by a coronavirus – scientists discovered high rates of ME and CFS among survivors. Based on one research paper, 40% of SARS patients reported problems associated with fatigue.
While fatigue-related Covid-19 cases may seem like a narrow focus, this may turn out to be a big positive for AIM stock. Given the volatile nature of the biotech and pharma space, it’s unlikely that all treatment/vaccine candidates will be proven effective. By concentrating on a specific framework, AIM potentially increases its chances for success.
Pro: Coronavirus May Be Rearing Its Ugly Head Again
Based on data from the Centers for Disease Control and Prevention, it appears that new daily infections have been picking up since early June. If so, that would obviously represent a potential catastrophe for our society and economy. Cynically, though, it might enhance the relevancy of AIM stock.
Still, I don’t want to jump to conclusions. Coronavirus testing among those who protested at Minnesota’s Twin Cities following the police killing of George Floyd revealed few new positive cases.
Yet recent data also shows that – for whatever reason – infection hotspots are sprouting in some U.S. regions. This has led to a rise in Covid-19 hospitalizations in a few states. Additionally, Beijing, China has reported a spike in cases, resulting in swift government action.
It’s safe to say that as long as the threat of a second wave exists, AIM stock will attract at least modest investor interest.
Con: Too Much Competition
Easily one of the biggest knocks against AIM stock is that the market for a coronavirus treatment/vaccine appears saturated. Don’t get me wrong – this isn’t an exclusive headwind against ImmunoTech. But with so many players competing in the same space, you’ve got to wonder about the sustainability of some of the smaller companies.
Further, it’s possible that should a pharmaceutical firm engineer an effective vaccine, such a platform would be much more desirable than a narrow-focused treatment like Ampligen. I’m basing this off the “ounce of prevention is better than a pound of cure” theory.
With how much Covid-19 has devastated our economy, I believe Americans are ready for a “one-stop-shop” preventative solution. And this idea isn’t without precedent. According to a Canadian survey regarding the H1N1 vaccine, fear of the virus causing the pandemic may have contributed to many seeking vaccination.
If that turns out to be the case here, that wouldn’t bode well for AIM stock.
Con: AIM ImmunoTech Is a Risky Biotech Name
Finally, before investors dive into AIM stock for the hopes of quick riches, let’s address the reality: ImmunoTech is a risky play in an ultra-risky and unpredictable space.
Again, before the pandemic, AIM was a veritable penny stock. Further, when you look at the financials, you can see why many didn’t pay attention to it before Covid-19. Although the company has some strengths, such as a relatively high cash-to-debt ratio, you’ll be hard-pressed to find other positives.
Frankly, AIM stock is riding on the success of Ampligen. This isn’t necessarily bad as the drug has powerful implications for ME/CFS. But it also has some speculative coronavirus pricing baked in, which is a distraction. If things in that arena don’t turn out well, shares could plummet in a hurry.
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.