The novel coronavirus pandemic has created several winners, including iBio (NYSEAmerican:IBIO). So far in the year, IBIO stock is up more than eight-fold. The classic $1,000 invested in this biotech stock in early January would now be worth $9,000.
Globally, vaccine development for COVID-19 is proceeding at full pelt. iBio owns a platform to manufacture a vaccine quickly and easily. It could have a place in long-term portfolios only if market participants fully anticipate the potential benefits and risks involved in investing in the pharma maker name. 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 IBIO stock.
Why IBIO Stock Gets Investor Attention
As of Aug. 28, the number of globally reported Covid-19 infections has topped 24 million. The outbreak has already killed close to 850,000 people. In addition to the devastating health effects, the economic effect has been unprecedented in recent times.
In early February, the company announced a partnership with China-based CC-Pharming to develop a vaccine for Covid-19, setting off a start of a run-up in the price of IBIO stock.
Management said 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. Later in June, management reported that a second vaccine candidate had advanced into preclinical testing. On Aug. 10, it announced data from preclinical testing in mice.
Currently iBio currently has two COVID-19 vaccine candidates in preclinical testing — IBIO-200 and IBIO-201. However, it gets more attention for its manufacturing technology than the preclinical candidates.
InvestorPlace contributor Muslim Farooque in June wrote about the FastPharming technology. He concluded 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 July 21, it hit a 52-high of $7.45. Since then, the price has been in decline, currently hovering at $2.40. As news headlines on developments in the race for a Covid-19 vaccine hit the wires, investors in IBIO stock typically reevaluate their positions.
The Bear Case for IBIO Stock
Writing in the journal Nature in April, editor Ewen Callaway noted:
“The push to make a coronavirus vaccine is moving at breakneck speed. Even as these ‘first in human’ trials get going, key questions about how our immune system fights off the virus — and how to safely trigger a similar immune response with a vaccine — remain unanswered.”
“[I]f vaccine candidates released on an accelerated schedule turn out to be ineffective or, worse, unsafe, it could send researchers back to the drawing board and end up delaying the development and wide-scale roll-out of an effective vaccine.”
Any biopharma company that plays a substantial role in finding a cure for Covid-19 will be a winner on many fronts. There are numerous companies that are currently working on vaccine development. They include Amgen (NASDAQ:AMGN), AstraZeneca (NYSE:AZN), BioNTech (NASDAQ:BNTX), Gilead (NASDAQ:GILD), GlaxoSmithKline (NYSE:GSK), Inovio (NASDAQ:INO), Moderna (NASDAQ:MRNA), Novavax (NASDAQ:NVAX), Pfizer (NYSE:PFE), Sanofi (NASDAQ:SNY), and Sorrento Therapeutics (NASDAQ:SRNE).
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. The iBio platform would mostly scale up manufacturing of a vaccine. In addition it has pre-clinical trials underway, which are a long way off from producing any meaningful results.
A successful vaccine developer 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, it has become a speculative bet.
The Bottom Line on Vaccine Bets
The race is on to develop a vaccine against Covid-19, which has affected the lives of billions of people. Could a small-cap stock like 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.
InvestorPlace contributor, Alex Sirois, believes “the run of IBIO stock is at its end.” I agree with him that IBIO stock is likely to come under further pressure. The price is likely to go below $2, a key technical level.
If I were looking to invest in the potential of a vaccine, I personally would consider one of the developers, not a contract manufacturer like iBio. But investing is not always an exact science. And each market participant has to hit the “buy” or the “sell” button alone.
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, including a Ph.D. degree, 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. She also publishes educational articles on long-term investing. As of this writing, Tezcan did not hold a position in any of the aforementioned securities.