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Could These 5 Stocks Benefit From the Coronavirus Outbreak?

By George Budwell - Feb 10, 2020 at 9:23AM

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These five biotechs are likely to remain on the volatile side this week, thanks to the novel-coronavirus threat.

The novel coronavirus, or 2019-nCoV, is set to dominate headlines -- and investing trends -- again this week. Underscoring this point, the number of confirmed cases now exceeds an eye-popping 40,000 globally, and the death toll has officially surpassed that of the SARS epidemic 17 years ago.   

While most U.S. equities are likely to react poorly to the continued spread of 2019-nCoV, biotech companies racing to develop treatments for this novel strain of coronavirus may, in fact, get a healthy boost from this rapidly developing healthcare story in the coming week.

Which biotech stocks should investors have a close eye in the days ahead? BioCryst Pharmaceuticals (BCRX 4.71%)Gilead Sciences (GILD 1.51%)Inovio Pharmaceuticals (INO 5.29%)Moderna, Inc. (MRNA 4.42%), and Novavax (NVAX 8.23%) could all make big moves this week on the coronavirus threat. Here's what investors need to know right now.

A map showing the spread of the coronavirus from China to the rest of the world.

Image source: Getty Images.

BioCryst: The moment may have already passed

BioCryst's tie-in to the coronavirus epidemic is its broad-based antiviral medication galidesivir. Galidesivir has reportedly shown activity against a wide swath of ribonucleic acid viruses, including coronaviruses. When the 2019-nCoV outbreak was still taking hold in China, the company's management said that they had been in contact with U.S. authorities, notifying them that galidesivir could be made available upon request. Since then, however, BioCryst hasn't said much about the company's involvement in the current outbreak. Consequently, investors probably shouldn't expect the biotech's stock to get much of a lift from this emerging public health threat. Then again, one never can tell when it comes to small-cap biotechs. These equities can break out on even the smallest rumor.  

Gilead: The front runner

Gilead arguably has the biggest stake in the game right now. In early February, Gilead announced that it had reached an agreement with Chinese health authorities to trial its antiviral medication remdesivir in patients infected with 2019-nCoV. Unfortunately, a Chinese research institute reportedly decided to apply for a patent covering the drug's use as an anti-coronavirus therapy. Gilead's brain trust said that they wouldn't push back against this controversial move. But this development probably means that Gilead will never receive significant financial compensation for remdesivir's use as an anti-coronavirus agent in China. That's potentially a big deal because this viral outbreak is currently spreading across China like wildfire. 

Inovio: A grant beneficiary 

Inovio is a clinical-stage vaccine-maker. The company's shares took flight approximately two weeks ago in response to a $9 million grant from the Coalition for Epidemic Preparedness Innovations to develop a vaccine against 2019-nCoV. And the biotech's shares got a second major boost from a collaboration with Beijing Advaccine Biotechnology to accelerate the development of the vaccine in question -- dubbed "INO-4800." Then reality kicked in.

As vaccines can take several years to trial, investors apparently realized that this experimental vaccine will probably never have a material impact on the biotech's top line. Inovio's shares, in turn, have since given back all of these gains and then some. Inovio's shares may perk up again in response to additional coronavirus-related headlines. But there's no reason to believe that this outbreak will ever be a significant event in the company's life-cycle. 

Moderna: The market's top coronavirus pick

Moderna's plan is to develop a messenger RNA (mRNA)-based vaccine for 2019-nCoV in record time. Wall Street, in turn, has seen fit to bid up the biotech's shares by a stately 26% since this news hit the wires last month. The fly in the ointment, though, is that this experimental vaccine will likely never see the light of day. At a bare minimum, Moderna's mRNA anti-coronavirus vaccine will take two to three months to even begin an early stage trial. However, this outbreak is widely expected to subside in early Spring with the onset of warmer temperatures. As such, there's no logical reason to buy this biotech stock based on the current coronavirus outbreak.  

Novavax: Much ado about nothing

Novavax, a recombinant nanoparticle vaccine developer, has clearly benefited from this coronavirus news. Although a good chunk of the 58% uptick in the biotech's stock this year can be attributed to other pipeline events, there's no doubt that the coronavirus threat has played a major role as well. In fact, Novavax's stock burst higher last month immediately after the company announced plans to develop a vaccine to protect against 2019-nCoV. Like the other vaccine developers on this list, however, Novavax's sizable move higher in response to this news doesn't make a whole of lot of sense from a fundamental standpoint. Novavax doesn't stand much of a chance of getting a vaccine approved and on the market before this viral threat evaporates completely.  

Are any of these stocks worth buying on the 2019-nCoV threat?

The blunt answer is a resounding no. The 2019-nCoV outbreak is highly unlikely to ever loom large in the value proposition of any of these biotech stocks. While it might be tempting to buy one or more of these stocks as the epidemic worsens, it's arguably a better idea to simply stand pat.  

 

 

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Stocks Mentioned

Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
GILD
$63.18 (1.51%) $0.94
BioCryst Pharmaceuticals, Inc. Stock Quote
BioCryst Pharmaceuticals, Inc.
BCRX
$8.90 (4.71%) $0.40
Novavax, Inc. Stock Quote
Novavax, Inc.
NVAX
$51.95 (8.23%) $3.95
Inovio Pharmaceuticals, Inc. Stock Quote
Inovio Pharmaceuticals, Inc.
INO
$1.99 (5.29%) $0.10
Moderna, Inc. Stock Quote
Moderna, Inc.
MRNA
$142.28 (4.42%) $6.02

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

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