Please ensure Javascript is enabled for purposes of website accessibility

2 Stocks That Could Skyrocket Over the Chinese Coronavirus Threat

By George Budwell - Updated Jan 27, 2020 at 8:33AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors are bidding up these biotechs in response to the health threat.

China's novel coronavirus, known as 2019-nCoV, isn't officially a public health emergency of international concern (PHEIC), according to the World Health Organization (WHO). Nonetheless, it appears to be well on the way toward becoming a global pandemic with serious implications for human health.

As of this morning, researchers tracking the spread of 2019-nCoV believe that there are as many as 2,800 infections globally, with 81 fatalities in China. Most concerning is the fact that the virus has already fanned out to over 10 countries, and this number is only expected to rise in the coming days. 

What does this all mean? Although the WHO has historically been reluctant to deem any exotic disease as a PHEIC due to the economic consequences involved, the agency may have no choice with the current outbreak of 2019-nCoV. What's important to understand is that the declaration of a PHEIC could trigger extraordinary measures by regulators in the European Union and the United States.

A vial of blood labeled "coronavirus".

Image source: Getty Images.

In short, the U.S. Food and Drug Administration and the European Medicines Agency would have the power to green-light experimental medicines to curtail an acute humanitarian emergency. This unusual set of circumstances could thus be a boon for two developmental-stage vaccine companies, Inovio Pharmaceuticals (INO -3.48%) and Novavax (NVAX -0.27%). Both stocks were up sharply in pre-market trading on Monday.

The race for a vaccine has begun in earnest

Last week, Inovio and Novavax both announced plans to develop nontraditional vaccines against 2019-nCoV. Inovio's product candidate will be based on its unique DNA-based platform, which has the potential to lead to an effective vaccine candidate in only a matter of weeks. Novavax, for its part, said that it has also initiated the development of an anti-2019-nCoV virus product using its recombinant nanoparticle technology and proprietary adjuvant Matrix-M.

Under normal circumstances, vaccines can take upward of a decade to move through the onerous clinical-trial and regulatory processes. Nonetheless, Novavax thinks that its experimental 2019-nCoV vaccine can be field-ready for human trials within just three months. That's an ultra-aggressive development timeline to be sure, but one that may be necessary to combat a potential pandemic. 

Keeping with this theme, the Coalition for Epidemic Preparedness Innovations (CEPI) awarded Inovio a $9 million grant last week to fund the biotech's work on a rapid response 2019-nCoV vaccine. Although Novavax wasn't included in the first round of 2019-nCoV vaccine development grants, this could change soon enough; the biotech has one of the strongest backgrounds in the development of respiratory disease vaccines in general. 

Time to buy?

The bad news is that it would take absolutely extraordinary events for regulators to waive the typical regulatory process for any vaccine candidate. That means that any 2019-nCoV vaccine would take at least four years to hit the market under a best-case scenario.

In other words, Inovio and Novavax may never realize a material gain from this particular infectious disease, despite their unique capabilities to design and manufacture novel vaccines in near-record time. Therefore, investors probably shouldn't buy either of these red-hot biotech stocks purely on the heels of this newsworthy event. 


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Novavax, Inc. Stock Quote
Novavax, Inc.
$51.67 (-0.27%) $0.14
Inovio Pharmaceuticals, Inc. Stock Quote
Inovio Pharmaceuticals, Inc.
$1.94 (-3.48%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.