What happened

At a news conference Sunday, President Donald Trump announced that the Food and Drug Administration issued an emergency use authorization (EUA) for convalescent plasma therapy as a treatment for hospitalized COVID-19 patients. Convalescent plasma is the liquid component of blood containing antibodies from patients previously infected with the virus. 

In response to this news, shares of the convalescent plasma therapy players ADMA Biologics (NASDAQ:ADMA), iBio (NYSEMKT:IBIO), and Kamada (NASDAQ:KMDA) each got a nice boost in pre-market trading Monday morning. ADMA Biologics' stock jumped by a healthy 68%, iBio's shares rose by a handsome 28%, and Kamada's equity perked up as much as 24% in early morning action today.  

A doctor holding bags of human plasma.

Image source: Getty Images.

So what

ADMA Biologics is a member of the CoVIg-19 plasma alliance. However, it doesn't have a late-stage COVID-19 plasma therapy in development quite yet. Nonetheless, the biotech may still benefit from this regulatory development in the short term by becoming an integral part of the supply chain.

iBio's connection to the current pandemic mainly stems from its plant-based vaccine efforts. In the past, though, the company has shown the ability to produce human plasma proteins with its platform. Investors are apparently hoping iBio will decide to push further in the therapeutic arena in the wake of this EUA.

Kamada, a small biotech based in Israel, is arguably the leader in the COVID-19 plasma-based therapy space. The company's plasma treatment is already available to COVID-19 patients in Israel via a compassionate use program. Kamada also has designs for initiating a U.S.-based trial for this therapy later this year.  

Now what

Should investors buy any of these red-hot biotech stocks today? While it might be tempting to chase ADMA Biologics, iBio, or Kamada in the wake of this positive regulatory development, there are good reasons to take a wait-and-see approach with each of these stocks today.

This EUA, in fact, wasn't without controversy. The FDA's own internal reviewer noted that placebo-controlled, randomized trials were still necessary to support the effectiveness of convalescent plasma therapy in hospitalized COVID-19 patients. That's not exactly a ringing endorsement. As such, it might be a good idea to stick to the safety of the sidelines with these three stocks today.