3 Biotech Stocks Likely to Gain as Coronavirus Spreads
Shares of several U.S. and China-based biotechs jumped earlier this week, following a report from authorities in China about a new strain of coronavirus in Wuhan. These biotechs are engaged in developing vaccines targeting flu.
Per China’s National Health Commission, more than 400 people have been infected by the virus, which has caused nine deaths so far. Moreover, the Centers for Disease Control (“CDC”) in the United States also confirmed on Jan 21 that one person in the country has been infected by the mysterious coronavirus. It is suspected that human-to-human transmission is spreading the virus, which can lead to an outbreak of an infectious disease. An outbreak will impact a huge number of people and companies developing related vaccines will likely get a boost.
More on Coronavirus
Coronavirus is commonly found in animals, which cause several diseases like diarrhea and upper respiratory disease. However, in humans, this virus results in mild-to-moderate illness including common cold. Seven different types of coronavirus have been discovered so far including the recent one in China. It has been named 2019 Novel Coronavirus (2019-nCoV) by the CDC.
In previous years, two strains of coronavirus led to outbreak of two infectious diseases. In 2003, a type of coronavirus named SARS-CoV caused a viral respiratory illness, severe acute respiratory syndrome (“SARS”). The disease spread to more than 12 countries infecting more than 8,000 people and leaving nearly 800 dead, with the majority in China. Another type of coronavirus, named MERS-CoV, was first reported in Saudi Arabia in 2012. This also led to a new respiratory illness called middle-east respiratory syndrome (MERS). People across 24 countries have been affected so far by MERS-CoV and developed symptoms like fever, cough and shortness of breath.
Although no cases of SARS have been detected since 2004 globally, MERS-CoV continues to infect people across the world. Per recent data made available by World Health Organization, there have been 2,494 laboratory-confirmed cases of MERS and 858 related deaths till November 2019.
Biotechs to Benefit
We expect the following biotech companies to benefit from the 2019-nCoV, if an outbreak occurs as feared. These companies are into developing vaccines, which can help authorities to restrict infection caused by the virus.
Novavax, Inc. NVAX is developing several vaccine candidates targeting seasonal influenza, respiratory syncytial virus (“RSV”) and Ebola. A pivotal phase III study is evaluating NanoFlu as influenza vaccine. Its RSV candidate, ResVax, is also in late-stage development. Moreover, the company had developed a vaccine for MERS in 2013. Its successful history with coronavirus makes the company a potential winner in case of an outbreak caused by the new coronavirus. The company has also started developing a vaccine for the same. Shares of the company surged more than 70% on Jan 21, following the recent reports from China. It carries a Zacks Rank #3 (Hold).
Moderna, Inc. MRNA has several messenger-RNA (mRNA) based vaccines in its pipeline in early-stage development for respiratory syndromes and flu. The company is working with several government health agencies in the United States for quickly developing a vaccine for 2019-nCoV. Faster vaccine development is necessary to contain the risk of an outbreak. Shares of the company are up 6.5% so far this week. Moreover, the company sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NanoViricides, Inc. NNVC is into developing nanotechnology-based anti-viral vaccines, targeting several infectious diseases including influenza or flu. Previously, the company had worked on developing treatments for MERS and Ebola, as reported in an article on marketwatch.com. This experience can help the company to develop a vaccine for the new coronavirus. Shares of the company surged more than 150% on Jan 21.
Meanwhile, a clinical-stage biotech, Vir Biotechnology VIR has expressed interest in developing a treatment for the newly found coronavirus using its monoclonal antibody technology.
Conclusion
We note that several of the biotechs, which surged following reports of coronavirus infection, were down the following day. It is assumed that the announcement by the Chinese and U.S. authorities created a euphoria, which led to the rally. However, uncertainty around the possibility of an outbreak may have resulted in a decline in share prices. Moreover, Novovax announced sale of its common stock on Jan 21, possibly looking to capitalize on the surge in its stock price and raise a capital of $100 million.
Meanwhile, the occurrence of coronavirus infection is still in early stage and the Chinese authorities deemed the situation as still preventable and controllable, as reported in a CNBC article. Moreover, human-to-human transmission of the virus is suspected. Other forms of transmission can reduce the chances of an outbreak. Moreover, if the U.S. health authorities are able to contain the risk of infection efficiently, it may be able to stop the spread of the coronavirus.
Investors must follow new updates from authorities globally for any new cases of coronavirus or spread of 2019-nCoV in China, the United States and other countries that have already reported a coronavirus infection.
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