Almost a month ago to the day, I recommended investors consider a safer way to play iBio (NYSEAMERICAN:IBIO) and the quest for an effective vaccine to stop the novel coronavirus in its tracks. Inevitably, IBIO stock took off like a rocket, gaining more than 100% from July 10 through July 31.
By comparison, the ETF I recommended, ETFMG Treatments Testing and Advancements ETF (NYSEARCA:GERM), is up a far more moderate 8.3% over the same three-week period.
If I told you that I could deliver to you an annualized total return of 144% (8.3% multiplied by 52 weeks divided by three weeks), most investors would gladly take that proposition. I know I would.
Now, I’m not saying that GERM is going to deliver anywhere near this kind of performance over the next year. But if you look at its top 10 holdings, I think it’s got a good chance of delivering a healthy gain.
As for Ibio, it’s looking less and less like it’s going to be on the winner’s podium when successful Covid-19 vaccines are announced and put into circulation later this year and into 2021.
Without a successful vaccine candidate, IBIO stock becomes far less attractive to speculative investors. While we might not be at that stage just yet, we’re getting closer. If you’re not a speculative investor, I don’t believe a long-term Ibio play makes a whole lot of sense.
For this reason, I continue to believe GERM is an even better bet than Ibio if you’re looking to benefit from the eventual winners.
What’s Ibio’s Business Look Like Without IBIO-200
In 2019, iBio had $2 million in revenue, 4.5 times its revenue a year earlier. Most of that growth (90%) was from its strategic relationship with CC-Pharming for the joint development of products for the Chinese biopharmaceutical market.
In March, InvestorPlace’s Dana Blankenhorn discussed the company’s FastPharming manufacturing system, which utilizes vertical farming and hydroponics to produce plant proteins quickly. He argued that Ibio’s most attractive attribute as a company is its contract manufacturing abilities.
“Rather than bet that iBio is going to end the coronavirus plague, I can see speculating on it based on the idea that it can deliver at-scale production of specific proteins,” Dana wrote March 16.
“Trouble is, I don’t know what that’s worth, and chances are neither do you. If producing proteins were a problem, I would think a large pharmacy company would have snapped iBio up by now. Isett may have been hired to shop iBio’s FastPharming system, in the form of intellectual property, to drug makers, or manufacturers of reagents.”
Isett, who was already an Ibio board member, was hired as chief executive officer (CEO) of the company on March 12, replacing Robert Kay. The latter remained on the board as co-chairman. Kay had led the company since it went public in August 2008.
“I believe Tom is exceptionally well-qualified to lead iBio as we continue to pursue additional commercial applications of our FastPharming System™, expand our CDMO business and advance our proprietary product pipeline,” Kay stated in March.
As my colleague argued in March, Ibio’s value lies not in its ability to deliver a vaccine for Covid-19 (it likely won’t), but in the technology it’s utilizing at its contract manufacturing facility in Texas.
Long term, that’s got to be worth something to investors, but it’s not worth 136 times sales.
GERM’s a Better Play Than IBIO Stock
As I stated in June, while GERM isn’t cheap, it gets the job done by having several top 10 holdings that appear in a better position to get the nod to provide a Covid-19 vaccine to the world; Novavax (NASDAQ:NVAX) and Moderna (NASDAQ:MRNA) being the most likely. And, by extension, benefiting financially from that win.
So, if you are speculating on the Covid-19 vaccine winners, GERM or even an ETF with extensive holdings in Pfizer (NYSE:PFE) and AstraZeneca (NYSE:AZN), would seem to be a much safer, not to mention smarter, way to play this. That’s especially true when you consider that it’s going to take several vaccines to inoculate the entire planet.
InvestorPlace’s Faizan Farooque probably put it best:
“Ultimately, the decision to pour capital in IBIO stock depends on what kind of investor you are. If you like day trading and keep a close eye on the headlines, you stand to make some dough on your investment. Every bit of news one way or the other will lead to massive swings in share value,” Farooque stated July 30.
“If you can stomach that, then, by all means, go ahead and play. If not, there are plenty of safe investments that you can get your hands on, especially in the tech space.”
He’s 100% correct.
For my money, without a vaccine, IBIO stock is a non-starter, while GERM remains a viable alternative.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
