After what can only be termed a bout of irrational exuberance, Aptorum Group (NASDAQ:APM) is back to being a humble penny stock (with the volume to match). Still, in 2020, any time a company makes even an oblique reference to being part of the novel coronavirus solution, the stock draws attention. And so it is that APM stock is raising questions.
It shouldn’t. I don’t mean to dismiss the company’s efforts out of hand. But the company has been in business for 10 years and doesn’t have a drug on the market. That’s not unusual. However, a look at its pipeline shows that there’s only one drug that’s nearing a late-stage trial.
Which means right now the company is putting all its revenue hopes on an in-licensing agreement to “co-develop novel molecular-based rapid pathogen identification and detection diagnostics (RPIDD) technology.” This moves the company into the field of liquid biopsies. And this potentially makes them part of the Covid-19 solution.
Why It Matters?
What we don’t know about Covid-19 spans a much bigger area than what we know. A vaccine may resolve some of the unknown, particularly the risk from asymptomatic transmission. But the closer that companies get to a vaccine, the more it becomes apparent that a vaccine will be ready when it’s ready. That’s actually good news. The more “warp speed” exits the conversation, the better the chances for a vaccine to be accepted.
However, that still means that doctors and nurses must treat the patients of today. By most accounts, this is a growing list. And that is bringing the topic of cell-free DNA (cfDNA) profiling to the forefront.
Covid-19 primarily affects the lungs. However for many patients it is a multi-systemic illness that affects multiple organs. Covid-19 can produce an uncontrolled immune response affecting a patient’s blood, heart, kidneys, liver, and brain.
One way that doctors can profile DNA is through a liquid biopsy. The hope of these tests is three-fold. First, these tests may provide biomarkers to estimate the severity of the disease in a Covid-19 patient and predict outcomes. Second, it can monitor the occurrence of injury to a patient’s cells, tissues and organs. And finally, it could potentially alert doctors if multiple organs are being affected.
Therapeutics like those from Regeneron (NASDAQ:REGN) and Gilead Sciences (NASDAQ:GILD) take a shotgun approach to the virus. And it may be a darn powerful shotgun. But the hope of a liquid biopsy is to tailor treatments to the needs of specific patients.
Don’t Buy Into the Hope of APM Stock
There are a couple of problems with buying into the hope of this pivot. First, Aptorum Group is not the first company to be engaged in the liquid biopsy process. Nor do they stand to be the biggest. Right now, they look like the company found a way to nudge its way into the Covid-19 discussion.
And that’s simply not a reason to buy APM stock. It’s unlikely that they will become the biggest, or the best, in this field. And beyond that, anything in the pipeline is still years away from being a revenue generator.
In fact, as Tezcan Gecgil points out, APM’s company management issued a cautionary note to investors. In the company’s most recent 20-F report, filed in late April the company said their business would be “materially harmed” if they were “unable to license or sublicense, sell or otherwise commercialize our drug candidates.”
I’ve learned that when a company makes a statement like this, it’s best to pay attention. Right now the risk of the Aptorum Group’s initiative leading to insufficient revenue is too high to make this anything more than a speculative stock.
There are many, better ways to speculate in a solution to the Covid-19 pandemic. I suggest you find one of those instead of putting capital at risk in APM stock.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.
