It wasn't very long ago that Adagio Therapeutics (IVVD 3.65%) thought it could have a big winner on its hands with experimental COVID-19 antibody therapy ADG20. However, the company's latest data has changed the outlook considerably. In this Motley Fool Live video recorded on Dec. 15, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss whether or not Adagio should say goodbye to its COVID hopes.
10 stocks we like better than Adagio Therapeutics, Inc.
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Adagio Therapeutics, Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of December 16, 2021
Keith Speights: There was some other bad news on the COVID-19 front, this time for a smaller company, Adagio. Adagio's experimental COVID-19 antibody therapy, ADG20, looked promising really just a few weeks ago, based on the company's data, Brian. I think you and I talked about how that had some encouraging data. But on Tuesday, Adagio announced new in-vitro results that weren't nearly as promising, and actually they were quite bleak.
The stock crashed close to 80%. What did you think of Adagio's latest results, first of all? The company says it hopes to find a path forward for ADG20. Do you think that's a futile hope or not?
Brian Orelli: ADG20 is a monoclonal antibody. It recognizes a conserved region on the spike protein of the coronavirus. I think the mutations in omicron must be changing some sort of structure, and it's now not allowing the monoclonal antibody to recognize the omicron variant, so it can't bind as tightly and can't block the virus.
Whether omicron is the downfall for Adagio depends on whether omicron becomes the dominant strain. Right now, delta is still the dominant strain, and so it has a path forward at this point. But if omicron ends up becoming the dominant strain, then the antibody wouldn't get used very much.
Keith Speights: I do think that's a big risk because in the United Kingdom, probably by now -- I haven't checked this morning -- but two days ago or a day and a half ago, healthcare experts in the United Kingdom were predicting that within 48 hours, omicron will become the dominant strain in that country. It's surged over the last several days.
There are already multiple states in the U.S. that have reported omicron cases. I think there's a real chance that omicron could be the dominant strain in the major markets like the U.S. and, of course, the U.K. and Europe. If that's the case, Adagio's in trouble with ADG20.
Brian Orelli: Definitely, yeah. I mean, if it becomes a dominant strain and the drug doesn't work against that strain, then it's a big problem for sure.
Keith Speights: Sometimes when there's bad news like this for a small biotech, investors overreact, because the company has bad news. But it still has a pretty good shot at coming out with positive news later. In this case, an 80% drop, to me, that's probably about right.
Brian Orelli: Yeah. I mean, that doesn't really have much -- a lot of the valuation was previously betting on the fact that ADG20 was going to be successful. The fact that it's not going to be, that's going to drop the valuation substantially.
