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COVID-19 has been a blessing and a curse for pharmaceutical stocks. While a few (mostly producers of antivirals and vaccines) have benefited, other pharma companies have seen selloffs.
However, the initial panic has subsided, and stability has returned to the markets. Which stocks stand to benefit in these COVID times, and which are all hype?
In today’s post, we’ll sort the wheat from the chaff
Easton Pharmaceuticals Inc
In October 2019, Canada embarked on the second phase of cannabis legalization. That month saw the long-awaited legalization of edibles, which required more regulation than oils/dried flower.
What does this have to do with Easton Pharmaceuticals? In the latter half of 2019, they opened a cannabis edibles division. They then reportedly made moves to acquire production capacity. Further sources claim they were in talks to sell edibles to established cannabis brands.
Recently, it appears EAPH stock is doing well. But, will their performance hold? We’re not optimistic – lately, times have gotten tough in the cannabis industry. Mix in the cash crunch induced by the current crisis, and this company’s prospects don’t look good.
It’s true recent reports have touted cannabis as a potential treatment for COVID. However, these findings have been limited to a handful of strains and are poorly understood. Given these facts, buying EAPH should only be done if you’re willing to gamble.
Inovio Pharmaceuticals is just the latest firm racing to develop a vaccine for COVID-19. This month, this Pennsylvanian company will launch trials for its COVID jab in South Korea.
The initial test group will inoculate 40 healthy adults. Pending the success of this trial, they plan on expanding to a second group of 120 volunteers. Should both experiments prove to be a success, they will move to the next phase (back in America) by mid-summer.
Their efforts come with a high degree of legitimacy. They received a $7.9 million grant from the Coalition for Epidemic Preparedness Innovations in April. And, in South Korea, they are working with the International Vaccine Institute, a globally-respected non-profit.
Even so, INO sank 12.9% on June 3. What’s going on? First, Dr. Anthony Fauci, the face of America’s response to COVID-19, commented that any Coronavirus vaccine may only confer temporary protection. And second, Inovio hit a major production snag with its contract manufacturer, VGXI, Inc. Things have gotten so bad, they’ve filed a lawsuit to get out of their agreement.
Given all this, should you go long or short? You may as well flip a coin. On the one hand, this production delay puts them significantly behind competitors like Moderna and AstraZeneca. It’s like tripping in the 100-meter dash – one mistake, and you’re likely finished.
Then again, we are in uncharted waters these days. COVID-19 is unlike any disease we’ve seen before – it’s not certain any company will create a successful vaccine. As such, if Inovio finds massive success with its trials and its competitors stumble, they’re back in the game.
INO is a bit of a gamble. Wager on it however you like, but with money you can afford to lose.
The story of Opko Health over the past few years has been one of pessimism. At present, 24% of its float has been sold short. If you aren’t a short seller, though, things appear to be turning around lately.
Owned by pharma billionaire Phillip Frost, Opko Health is a company that takes minority stakes in a variety of health firms. Back in 2017, he boasted that his company would soon amass sales revenue in the billions.
So far, that hasn’t materialized, with 2019 revenue checking in at a disappointing $900 million. Also, in 2018, Mr. Frost ran into trouble with the SEC over allegations of micro-cap fraud. They settled out of court, which called the integrity of Opko Health into question.
Considering this, why has OPKO risen 9% this year while competitors have fallen by double digits? It turns out that BioReference Labs, one of the companies under the Opko umbrella, is a significant processor of COVID-19 tests. Business has been brisk lately, to say the least.
Is OPKO a good buy? On the one hand, its checkered past and disappointing past performance are concerning. Furthermore, COVID-19 won’t last forever – at some point, a company will develop an effective vaccine.
However, the quest for a COVID vaccine might also run into delays. That means that COVID could be here to stay for the foreseeable future. Also, Phillip Frost built his fortune from the ground up. It takes more than luck to become a billionaire – to reach that level of wealth, you need to be an astute judge of value. For this reason, Opko Health may find its footing in the years ahead.
We rate this stock a buy.
Despite the overwhelming volume of COVID infections in America (1.95 million and growing), evidence suggests some authorities have been undercounting. Thus, as firms are developing them, COVID antibody tests are increasing in demand.
Abbott Laboratories is one of the companies crafting these diagnostic tests. Despite a hiccup in Mid-May, they have proven to be highly reliable. Now that the first wave of Coronavirus has mostly passed, their antibody tests are now their hottest product. Demand isn’t just limited to America, either – recently, British authorities also gave Abbott Laboratories the green light.
Despite all this, Abbott Laboratories isn’t necessarily a slam-dunk buy. Analysts with Goldman Sachs feel enthusiastic investors have overbought the stock. What’s our take? We agree that further gains aren’t a given. However, we also realize demand for antibody tests worldwide is likely to be strong in the months ahead.
Despite the distinct possibility of a correction, we feel ABT still has room to run. We rate Abbott Laboratories to be a short-term buy.