The novel coronavirus pandemic has created several winners, such as iBio (NYSEAMERICAN:IBIO), in equity markets. So far in the year, IBIO stock is up over 500%. Put another way, if you had invested $1,000 in this biotech stock in early January, you’d now have over $6,000.
Countries around the world are regarding a potential drug or a vaccine as a fast-track to a normal life. Investors are wondering if they should buy into the shares of iBio, which owns a platform to manufacture a vaccine quickly and easily.
I believe IBIO stock could have a place in long-term portfolios only if market participants fully anticipate the potential benefits and risks involved in investing in the company. The question might come down to whether a market participant prefers to invest in a potential vaccine developer or a contract manufacturer like iBio. With all that in mind, let’s delve right into the company.
Why IBIO Stock Has Been on Fire
As of June 16, the number of globally reported Covid-19 infections has passed 8 million. And the outbreak has already killed close to 450,000 people. In addition to the devastating health effects, many countries and private citizens have also been affected economically.
Meanwhile, since late February, a number of major pharma companies as well as smaller biotechnology firms have made the headlines. They rush to test and develop antiviral drugs as well as vaccines against the novel coronavirus. The hope is to either treat or prevent Covid-19. As a result, share prices of such publicly listed companies have strengthened.
New York-based iBio, a plant-based biopharmaceutical contract development company, is one of them. It creates biologics for research and other manufacturing uses. It uses an Australian plant related to tobacco.
In early February, the company announced a partnership with China-based CC-Pharming to develop a vaccine for Covid-19. And that announcement marked the start of a run-up in the price of IBIO stock.
According to iBio Pharma management, if this research collaboration with CC-Pharming becomes successful, it “will deliver product candidates which can then be quickly produced at iBio’s FastPharming Manufacturing Facility.” In March, iBio began pre-clinical work at Texas A&M.
InvestorPlace contributor Muslim Farooque recently wrote about the FastPharming technology. He concludes that “it will effectively reduce the initial setup time compared to the traditional manufacturing approaches in the industry. Therefore, iBio can easily avoid expensive and labor-intensive cell-line development.”
In early February, IBIO stock was around 25 cents. On Feb. 28, it hit an intraday-high of $3.4. Since then, the price has been in decline, currently hovering at about $1.50.
What Could Derail IBIO Stock?
Countries around the world are regarding a potential drug or a vaccine as a fast track to a normal life.
Any biopharma company that plays a substantial role in finding a cure, such as a vaccine, for Covid-19 will be a winner on many fronts. Our regular readers will know that in addition to iBio Pharma and CC-Pharming, there are other companies that are currently working on vaccine development.
They include AstraZeneca (NYSE:AZN), Gilead Sciences (NASDAQ:GILD), GlaxoSmithKline (NYSE:GSK), Inovio Pharmaceuticals (NASDAQ:INO), Moderna (NASDAQ:MRNA), Novavax (NASDAQ:NVAX) and Pfizer (NYSE:PFE) .
It’s important to appreciate the difference between these companies and iBio. The others are working on vaccine or drug candidates which are undergoing human testing. On the other hand, the iBio platform would scale up manufacturing of a vaccine.
Most analysts agree that any company that is able to develop a successful vaccine will be able to reap the financial benefits. How about a contract manufacturer like iBio? How much revenue could a manufacturing contract mean for iBio? The answer is not as clear.
And that uncertainty is potentially reflected in the IBIO stock price. After the initial hype of late February, it has become a speculative bet. Another InvestorPlace contributor, Chris Tyler, believes investors should possibly keep away from the stock at this point.
I also believe that IBIO stock is likely to come under further pressure. I expect it to go first toward $1.2 and then possibly below $1.
The race is on to develop a vaccine against Covid-19, which has affected the lives of billions of people. Could IBIO stock become one of the winners that deserve your bet?
It is not an easy question to answer. If your risk/return profile allows you to allocate some risk capital, then the company could have a place in your portfolio.
If I were looking to invest in the potential of a Covid-19 vaccine, at this point, I’d consider one of the developers and the inventors. But iBio is a manufacturer that may or may not necessarily win a contract to manufacture the vaccine.
Investing is not always an exact science. And each market participant has to hit the “buy” or the “sell” button alone.
The most important issue is to be fully aware of the potential effects of a given investment on the portfolio. After all, it is your hard earned money that is at stake.
If you are interested in other biotech stocks, you may also consider buying an exchange-traded fund. Examples would include the ARK Genomic Revolution ETF (BATS:ARKG), Invesco Dynamic Biotechnology & Genome ETF (NYSEARCA:PBE), iShares NASDAQ Biotechnology ETF (NASDAQ:IBB) or SPDR S&P Biotech ETF (NYSEARCA:XBI).
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. As of this writing, she holds PFE covered calls (June 19 expiry).