Like many biotechnology companies, iBio (NYSEMARKET:IBIO) is attracting attention from investors for its novel approach to a potential Covid-19 vaccine. There’s no question that a share price of just over $1 makes IBIO stock attractive. But it’s still a penny stock. And penny stocks, particularly biotech stocks, typically trade at low prices for a reason.
In the last week of May, two InvestorPlace articles had conflicting headlines that illustrate the issue surrounding iBio stock. First, Louis Navellier wrote an article titled, “Buy iBio Stock As An Effective Vaccine Could Be Imminent.” On the other side of the buy-sell argument, Mark Hake wrote an article with the headline, “Slim Vaccine Chances Make iBio Stock Too Speculative Here.”
This is more than believing the glass is half empty or half full. The issue comes down to how you feel about iBio’s chances of getting its vaccine approved.
Why Are Investors Excited About iBio’s Vaccine Candidate?
In a world that now gives us plant-based meat, iBio is developing a plant-based Covid-19 vaccine candidate. No matter how you feel about a vaccine, there is little doubt that many Americans are not going to feel comfortable participating in the economy, or in a life outside of their four walls, without a vaccine or a meaningful anti-viral treatment.
The problem is that iBio seems a little late to the party. The company does not yet have its vaccine candidate in clinical trials. And as Hake’s article emphasized, approval for iBio’s vaccine is no certainty.
But if it does, the stock can take off like a rocket. That is at the heart of Navellier’s argument. Because the vaccine is plant-based, it will be easier to produce at scale.
However, that will require the vaccine to get approval. And that can’t happen without clinical trials. The federal government is pledging to fast-track that process. This is the case with Moderna’s (NASDAQ:MRNA) mRNA vaccine candidate that recently received encouraging Phase 1 results. But the stock is cooling off amid speculation about whether it will get approval in the end.
And even if iBio starts clinical trials, there are many experts that say the current 12- to 18-month vaccine timeline to be overly aggressive. Paul Offit, the co-inventor of the rotavirus vaccine, went so far as to call such a timeline “ridiculously optimistic.”
Life Beyond Any Vaccine Hopes
Anytime you’re considering investing in a biotech stock, it’s important to make sure the company does not have all of its eggs in one basket. To that end, in December, before any of us were aware of the novel coronavirus, iBio announced two key partnerships.
First, the company joined the Advanced Regenerative Manufacturing Institute (ARMI). ARMI is a public-private consortium that is seeking to develop next-generation processes for organ and tissue manufacturing. The institute will be receiving approximately $80 million from the federal government.
The second announcement was iBio’s collaboration with EdgePoint AI, to help deploy EdgePoint’s proprietary artificial intelligence (AI) blockchain-driven vision system, TrustPoint Fabric.
While both of these opportunities suggest that iBio has viability beyond a potential vaccine, it’s hard to see either collaboration providing revenue in the near term.
History Suggests Caution When Buying IBIO Stock
When it comes to penny stocks, I like to look at historical trends. In the case of iBio, with a couple of notable spikes in 2011 and 2014, the stock has been trading largely below $10. However, for some investors, the definition of a penny stock requires a stock to be under $5 per share. If that’s the case for you, then be advised that IBIO stock has traded below $5 since the end of 2016.
With plant-based products becoming mainstream, I think iBio is a stock to watch. This is particularly true if the company’s Covid-19 vaccine becomes more than a theoretical possibility. But there’s no rush and considerable risk involved in buying IBIO stock.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
