Covid-19 vaccine stocks have been on fire over the past few months, as news flow on the coronavirus vaccine front has been overwhelmingly positive and hopes for a workable vaccine being widely administered by early 2021 have gained significant credibility. In this rising tide, small-cap biopharmaceutical company iBio (NYSEMKT:IBIO) — who is working on creating a Covid-19 vaccine in modified tobacco leaves — has been one of the biggest winners. Year-to-date, IBIO stock is up nearly 2,000%.
Most investors and analysts who follow the stock think this rally is overdone.
Most of my peers on InvestorPlace have been pounding on the table that IBIO stock is nothing more than a speculative Covid-19 vaccine play that has turned into a bubble. The one sell-side analyst who covers that stock has a $2.80 price target on the stock, about 40% below the current IBIO stock price. Even insiders are selling.
And yet, IBIO stock just keeps going higher.
So does everyone have it wrong on this small-cap biotech stock? Is IBIO stock actually the real deal?
It could be. But I doubt it. And I think that the consensus opinion here is ultimately the right one. IBIO stock appears to a bubble. It just may take some time for this bubble to pop.
The Case for iBio Stock and FastPharming
Very few pieces I’ve read across the financial space appropriately discuss the bull thesis for iBio.
This is really much more than just a Covid-19 play. It’s a bet that the company has developed a novel biologics process that could meaningfully accelerate and improve general vaccine development.
Specifically, iBio has created a novel technique called FastPharming which develops antibodies, other therapeutic proteins and vaccines from plants. The breakthrough here is that FastPharming, by using plants as bioreactors, skips the traditionally expensive, labor-intensive, cell-line development, and can be scaled very quickly — all you need to do produce more of a vaccine is grow more plants.
FastPharming, in theory, is therefore a faster, more cost-effective, more scalable and greener vaccine development process than legacy methods.
The bull thesis on iBio is that a Covid-19 vaccine will serve as a “proving grounds” for this FastPharming approach. If successful on the Covid-19 front, the FastPharming approach could be more broadly adopted across the general vaccine manufacturing landscape, with the dream of plant-based vaccine development reaching ubiquity.
Possible? Sure. And if it happens, IBIO stock will be worth a lot more than just $5. Emphasis on a lot.
Likely? I don’t think so. And that’s why I’d avoid IBIO stock here and now.
Too Much Speculation
The reality is that while iBio’s FastPharming approach is a potential breakthrough in vaccine development, it’s also largely unproven to-date.
As a largely unproven process, FastPharming has a lot riding on a Covid-19 vaccine — which, in it of itself, is also largely unproven.
So, when you zoom out and look at the long-term IBIO growth narrative, it’s quite compelling… until you realize it’s built on a bunch of unproven processes and vaccines.
After all, just look at where IBIO stock was prior to the coronavirus pandemic. This was a 20 cent stock.
There’s a reason for that. If Covid-19 vaccine efforts ultimately materialize into nothing, the company doesn’t have much to hang its hat on to prove its novel FastPharming approach at scale.
Without proof of that approach, you won’t get widespread adoption, you won’t get big revenue growth and you won’t get a huge breakout in IBIO stock.
To that end, I think there’s just simply too much speculation surrounding this company today to make IBIO stock worth it… yet.
Bottom Line on IBIO Stock
Don’t get me wrong. IBIO stock could continue to soar over the next few months so long as Covid-19 vaccine news flow remains favorable, and so long as the company remains in the hunt to manufacture and distribute a workable vaccine.
But the long-term bull thesis here is built on speculation, not fundamentals, and for that reason, I can’t in good faith recommend IBIO stock here.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he did not hold any positions in any of the aforementioned securities.
