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IBIO Remains a Purely Speculative Bet

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Even since iBio (NYSEAMERICAN:IBIO) joined the race for the novel coronavirus vaccine, IBIO stock has been among the top speculative bets. After falling from a 52-week high of $7.45, the stock has witnessed some consolidation around $2.

A scientist in medical gear peers through a microscope.

I don’t rule out the possibility of IBIO stock surging again after consolidation, in particular if the is positive news related to the clinical trials. However, I don’t see the stock as a long-term investment. At best, the stock can deliver short-term trading returns.

A McKinsey reported pointed out that “more than 250 vaccine candidates are being pursued globally.” Based on past evidences, McKinsey has also opined that “world could get seven to nine vaccines over the next two years given historical vaccine success rates and the current pipeline of candidates.”

Even if the world gets 10 vaccines over the next two years, the success rate would be just 4%.

Given this estimate, I would not be betting on iBio to deliver a vaccine. As an investment for potential vaccine success, I would rather look at AstraZeneca (NYSE:AZN) or Pfizer (NYSE:PFE).

Even Moderna (NASDAQ:MRNA) is attractive with the company having signed an agreement with the U.S. government for 100 million doses of mRNA vaccine. The company is also in discussion with the European Commission and Japan for the supply of the vaccine.

A Discouraging Track Record

Before talking about the company’s progress related to the coronavirus vaccine, its important to note that iBio was established in fiscal year 2008. After more than a decade of operations, the company still does not have an approved vaccine or drug.

I would therefore be very surprised if the company is among the Covid-19 vaccine producers. The company’s track record is a key reason to consider the stock as purely speculative.

The company’s July 2020 presentation talks about nine potential vaccines or drugs in the pipeline for various indications. However, only one vaccine has completed Phase 1 clinical trials. The others are still in Phase 1, pre-clinical or animal testing stage. I therefore don’t see the company delivering a vaccine or drug that triggers top-line growth in the next few years. Even if investors are looking at the pipeline beyond the coronavirus vaccine.

It’s true that Moderna was established in FY2010 and the company also has no approved drug or vaccine. However, agreement with the U.S. government lends credibility to the company’s vaccine development program. Moderna also has an exciting pipeline of other vaccines. Further, partnership with the likes of AstraZeneca and Merck (NYSE:MRK) for few clinical trials adds to its credibility.

In addition, Moderna has started Phase 3 trials toward the end of July 2020. On the other hand, IBio’s potential candidate is yet to enter the first phase of trials. As a matter of fact, seven vaccine candidates are already in Phase 3 trials.

Of course, if the company’s initial phases of clinical trial are encouraging, IBIO stock can trend higher. A small speculative position in the stock can deliver returns. However, I am certainly not betting on the company to deliver the vaccine for Covid-19.

Concluding Views on IBIO Stock

Way back in December 2015, iBio agreed to pay “$1.9 million to settle a federal class-action lawsuit brought by stockholders.” According to stockholders, the company had “repeatedly lied about the role it played in producing an experimental Ebola drug.” Given this track record, I would be cautious from an investment perspective.

However, iBio remains among the “100 Most Popular” stocks on the Robinhood website. Speculators are therefore actively trading the stock to benefit from short-term volatility. As long as companies continue to work on the vaccine, the IBIO stock will remain in the limelight.

On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector. As of this writing, Faisal Humayun did not hold a position in any of the aforementioned securities.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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