iBio, Inc. (NYSEMKT: IBIO) has had a monster run during the COVID-19 pandemic. As recently as November, iBio stock trading hands at just $0.05 per share. It now trades for $2.20 and hit a high of $3.40 back in February. That’s a 6,700% move from the recent lows to the recent highs.
While I’m naturally skeptical of any stock with moves that extreme, it’s not hard to see why iBio stock has captured investor attention. iBio is working on a vaccine for COVID-19, but the story is bigger than that. iBio also handles mass production of vaccines and therapeutics developed by others. You can think of iBio stock a being the Taiwan Semiconductor (NYSE: TSM) of biotech. It doesn’t depend purely on its own products but rather offers a platform for others.
Why This Matters
It’s getting nasty out there. COVID-19 case counts have risen to around 60,000 per day in the U.S. alone and close to 200,000 globally. And those are just the ones we know about. Untold cases will likely never be counted. And perhaps worst of all, the herd immunity we’ve been hoping for may not pan out. A recent study out of the UK suggests that immunity following infection might wear off just a few months after infection.
That should throw a wet blanket on any remaining hopes of a V-shaped economic recovery. But it’s potentially great news for iBio stock. To start, it implies that herd immunity won’t happen without a vaccine, as we’ll potentially just continue to pass the virus around indefinitely. But beyond that, it also implies that any vaccine will be “rented” rather than “owned.” To effectively eradicate the virus, we might need to get annual booster shots, making them a recurring revenue stream for the vaccine maker.
Should You Buy iBio Stock?
Before we get ahead of ourselves, we need a dose of reality. iBio doesn’t have a vaccine for COVID-19, at least not yet. The massive run-up in iBio stock was based on hope that it might develop one or mass produce it. That has yet to materialize, and it may never materialize. Biotech plays have been compared to throwing a plate of spaghetti on the wall and seeing what sticks. iBio is no different here.
Stock in iBio is wildly speculative, and the company has never turned a profit. In the company’s entire 13-year history, it hasn’t posted a single year of positive operating profits or net profits. The company stays afloat by being a serial share issuer. iBio more than doubled its shares outstanding in the first quarter, and the share count has risen by a factor of nearly eight since 2018.
Of course, none of this matters if the company develops a COVID-19 vaccine or secures the manufacturing rights to another developer’s cure. If either of those scenarios comes to pass, iBio stock will be worth many multiples of its current share price.
But that’s a big if. And you can’t risk your nest egg on a bet that speculative.
If you want to trade iBio stock with your play money, go for it! Who knows, you might get lucky and score a win big enough to pay off your house. But don’t get carried away here. Any stock capable of rising from $0.05 per share to over $2 based on a little more than hope can drop right back to $0.05 in a hurry.
Charles Lewis Sizemore, CFA is the principal of Sizemore Capital Management, a registered investment adviser based in Dallas, Texas.