I’ve gotten a few questions about the latest Technology Profits Confidential (currently $79/yr) tease from Ray Blanco, so although it’s a few weeks old now, and started circulating right in the heat of the first coronavirus downturn in mid-March, I thought I’d take a look today. It is still a current ad, I got it again from Ray Blanco a day or two ago, and it’s still promising “3 Companies That Could Save Lives and Make You a Fortune” in the fight against the coronavirus.
The first part of Blanco’s “presentation” references the initial White House meetings about the response from pharma companies…
“At 3pm Wednesday, March 4th, I was on the phone with the CEO of a publicly traded company my research says is winning the race to develop a vaccine for the coronavirus.
“Just two days earlier, this CEO participated in a pharma industry virus roundtable at the White House, and took part in a briefing of President Donald Trump….
“Here’s what he told me when we talked….
“In short, his company (shares trade under $10 as I write, but are up over 200% in just the last few weeks) started pre-clinical steps testing a COVID-19 coronavirus vaccine on January 23.
The company then completed designing their pending human clinical trial on February 29, just days ago.
“Today, the company is preparing 3,000 human trial doses for testing here in the United States.”
And he lays out the kinds of aggressive testing timelines we’ve seen from other biotechs who are trying to get a jump on COVID-19
“By April, the vaccine will be in testing around the world.
“By autumn, full human clinical trial results will be presented and published.
“By the end of this year, if all testing goes well, up to 1 million doses of the vaccine will have been produced for emergency use.”
And some of the big-picture rationale for investing in these kinds of companies:
Best case, 3 companies I want to share with you today, and one in particular… the under – $10 a share company I told you about earlier… get in front of COVID-19 in the worst hit areas in the months ahead.
“That would rocket share prices higher for the company that develops a working vaccine… make fast movers a fortune… and save tens of thousands if not millions of lives.
“It would, simply put, be the biggest market story any of us have seen in years.
“And it’s unfolding all around us right now.”
So that’s the hint-dropping about his first stock, and there are two others to get to as well — what are they?
A few other hints about the first one:
“This company has a record with unique virus outbreaks, and has a MERS vaccine in Phase 2 testing right now.
“The company received $56 million in funding from The Coalition for Epidemic Preparedness Innovations (CEPI) to develop the MERS vaccine in testing now.
“… if you’re going to put your chips on one company in this fast-moving crisis, it’s this CEO’s company.”
So that, along with the photo that Blanco lifts from the White House meeting, is clearly a reference to CEO Joseph Kim and Inovio Pharmaceuticals (INO) (you can see the original clip from the meeting at CSPAN here if you like).
And yes, the stock of Inovio did surge higher in the early days of the crisis, right around that White House meeting when the CEO claimed to be the worldwide leader in coronavirus vaccine development. Not long after INO claimed to have developed a new vaccine for the virus in three hours, the class-action law firms and short-sellers jumped all over those claims and wondered whether the CEO might perhaps be exaggerating a bit.
I don’t know how it will work out, certainly we all hope that Inovio and its competitors quickly develop life-saving vaccines for the coronavirus, and they might, but there are a lot of companies involved and Inovio is not the one that inspires the most confidence in me, personally. That’s OK, since I don’t generally try to speculate on individual biotechs, perhaps you’ve got more patience with that sector and will find INO’s work compelling — they have been working on these kinds of diseases for a long time, they have been working on a five-year grant from CEPI (that’s the $56 million one teased) to develop MERS and other vaccines since 2018, and they did get another $9 million grant in January for the coronavirus vaccine work, then another $5 million grant from the Gates Foundation in early March to help speed up development of their vaccine delivery device. They do plan to start human trials this month, though they don’t expect to publish their results until the Fall so it might be a while before we have any results that will shift investor perceptions.
Inovio was also one of Ian Wyatt’s teased picks that we wrote about a couple weeks ago, with his ads still rolling as well, and it has been trotted out and teased by pretty much any biotech newsletter you can think of over the past 6-8 years as it has been associated with development of new vaccines or vaccine technologies to fight Zika, Ebola, develop cancer immunotherapies, or whatever else is prominent in the headlines. Hopefully it will work, we’ll see.
Then the pitch moves on to the other two companies — and one of them is a “freebie” that actually gets named in the ad:
“I’ve discovered three fast movers that I’m confident will be the answer to our collective prayers in the midst of the chaos…
“Saving the lives of potentially millions of people worldwide and giving early investors the chance at massive gains.
“The first company leading the charge is the $25 billion pharma giant, Regeneron.”
Certainly Regeneron has been in the news plenty of times for the coronavirus, and as a result it’s now a $50 billion company, not a $25 billion one (though to be fair, the price has risen only 50% since the January lows, it hasn’t actually been below a $30 billion market cap in more than five years). You can see the COVID-19 efforts they’re making now, including testing an existing antibody drug and trying to develop a new one, on their COVID-19 update page here. I’d be more inclined to look at an established company with antivirals or antibodies that might be effective therapeutics in the near term, since they could make a big impact a lot faster than a vaccine could, but it’s also a pretty high-risk bet that any particular therapy will work… or, perhaps more importantly from an investment perspective, whether it would make a lot of money. No established company, like Regeneron or Gilead, is going to want to be a price gouger for antiviral treatments, and the burst of coronavirus therapeutics business, even if successful, is likely be a one-year event. I love that every pharma company is stepping up to try to treat this pandemic, and it will presumably be of financial benefit to a bunch of companies to some degree, but I’d be hesitant to bet on any particular drug as likely to create a financial windfall.
Regeneron is a relatively safe bet within the “biotech” space, they’re profitable and growing at a decent clip without their COVID-19 work, with a forward PE of only 18, so the stock could certainly drop back down by 30% if the folks trading the coronavirus news move on to other things, but the biggest risk is probably that investors might refocus on the patent cliff danger of their lead drug, Eylea, as competition comes in and the patent expires in a few years. They do have a half dozen approved drugs, but Eylea is the big earnings generator, and, as with all biotechs, there’s plenty of uncertainty in their pipeline (though there are another eight drugs in Phase 3 trials, so there’s also hope for revenue replacement eventually). A coronavirus treatment, if quickly successful, might be well-timed for Regeneron to plug some of the potential revenue gap from Eylea for a couple years while other drugs are developed, but I’d guess it would probably be more of a news generator than a profit center.
And, of course, I’m not at all a biotech expert so I shouldn’t be guessing on the possible permutations at all… let’s move on and see what the other “secret” name is…
“A Therapeutic AND a Vaccine…
“This Second Company Could Solve The ‘COVID-19 Crisis’
“The second company that has my attention in the fight against COVID-19 is a California biotech pioneer treating some of the most destructive viruses in history for over 30 years.
“And they’ve got the track record to back them up.
“In 2016, they pushed through the only vaccine proven to prevent a virus that has killed over 32 million people.
“And they could do it again with COVID-19.
“The most exciting part?
“The medication they’re testing now could work as both a treatment and a vaccine…
“Preventing millions of people from contracting the virus… while saving the lives of countless others who have already contracted it.”
That sounds exciting, right? We need a therapeutic now, and understand that a vaccine for the mass population would be at least a year away… but wouldn’t it be nice to combine the two?
“They’ve seen positive results in infected mice….
“… they’ve seen similar results with one patient suffering from COVID-19 in Washington state.
“Now, obviously it takes more than one case to prove it’s both safe and effective…
“But that’s why they’re rushing to test this medication throughout China and Southeast Asia as soon as possible.
“They’re starting trials this month and expect to have results back within months…”
So who’s that? Thinkolator sez this must be another tease of Gilead (GILD), which has long been a leader in HIV medicines and other antivirals (HIV/AIDs has killed over 32 million, as teased), including preventives, though it’s best known in recent years for being part of effectively curing Hepatitis C in millions of people.
And yes, the stock has gotten a boost of 20% or so this year as they’ve rolled out testing in the past few weeks to see if remdesivir, an investigational antiviral that they’ve tested in lots of other viruses over the years, including Ebola, will work to ease COVID-19 symptoms. Gilead is the stock I’d find most compelling of the many coronavirus “story stocks” being talked up, but it’s not one I’ve bought and I’m not terribly likely to speculate on individual pharmaceutical or biotech stocks. It was also one of the ideas pitched by Ian Wyatt a few weeks back, so I’ll just re-share what I wrote then:
This must be Gilead (GILD), which is probably the most prominent large antiviral company — and is also, coincidentally enough, the largest component of the iShares Biotechnology ETF (if you buy IBB, about 9.5% of the money you invest is buying GILD shares). The shares are well off their highs of 2015, mostly because of the declining sales of their Hepatitis C drugs (Sovaldi and Harvoni) as those populations who were relatively easy to cure with those drugs washed through the system pretty quickly.
And yes, they’ve been in the headlines this year because one of their experimental drugs, remdesivir, has shown initial promise in some early “compassionate use” cases for COVID-19 patients, and is being tested in some larger cohorts right now to see if it’s relatively safe and effective in treating this new viral disease. That 900 patients bit isn’t exactly accurate, it’s more like 1,000 at this point who they intend to treat in the trials, but it’s close and that’s from his speaking, not from any written materials. Likewise, Gilead is not currently led by a Nobel laureate, but has had several Nobel Prize winners on its board in the past.
It’s also true that Gilead looks quite undervalued compared to most biotechs and many pharmaceutical companies — that’s mostly just because they aren’t expected to grow their revenue over the next few years, and companies that don’t grow have lower PE ratios, all else being equal, than companies with robust revenue and earnings growth. As with many larger biotech and pharma names, it’s mostly about maximizing their revenue from blockbuster drugs and managing the pipeline so that new drugs can be approved to replace drugs that lose their patent protection and go generic (or, like Gilead’s Hepatitis C drugs, see a declining market).
Gilead doesn’t have any net debt (cash and debt are roughly equal), and it is nicely profitable and pays a good dividend, so that looks fairly attractive these days when investors are suddenly more worried about “survival” than “growth,” but they are not all that likely to get a huge financial boost from COVID-19 this year. It’s possible that remdesivir will be a hugely successful treatment for the disease, and I hope it is, it showed some success with MERS and SARS after failing to be effective against Ebola and has some safety concerns but still seems to be at the top of the list of “most hopeful” drugs right at the moment… but even if that’s the case, it’s not certain that Gilead would push it through with windfall pricing or turn it into a mega-blockbuster in the next year or two.
I have no idea how it will work out, but Gilead is a strong company with a lot of financial flexibility and huge resources in developing antiviral drugs, so I wouldn’t try to talk you out of it — just keep in mind that any short-term moves the stock might have (so far it has clearly reacted to the COVID-19 news but is mostly just doing “less bad” than the market, not rocketing higher), are likely to be story-driven more than financials-driven, it takes a few billion dollars to really make an impact on GILD’s revenue line. And on the flip side, of course, some disappointing results from these remdesivir trials could take a lot of wind out of their sails.
So the remdesivir “story” is both the upside and the downside potential for Gilead — here’s an updated chart of Gilead compared to the iShares US Pharmaceuticals ETF (IHE) year-to-date — you can see that GILD (in blue) has done well during the coronavirus panic while most of big pharma has not… which means that if GILD loses it’s “story” position in relation to coronavirus because remdesivir turns out to be too dangerous, or doesn’t work in these trials (we’ll know more probably around the end of April, they haven’t said exactly when they’ll publicize results but presumably this will all move as quickly as possible), then Gilead in this environment would be “just another big drug stock” and might join its cohort down there along that orange line.
And that’s about all I’ve got to share with you about Ray Blanco’s three “coronavirus fighter” stocks — one hugely story-driven vaccine hopeful, and a couple big biotechs that are holding up pretty well thanks to the coronavirus story but also have real income-generating businesses in other areas. Gilead, Regeneron, Moderna (MRNA) and Inovio are the four most-cited story stocks for the coronavirus that I’ve seen in my reading, but there are dozens of others that would like to be in that category as well — Marketwatch posted a list of 19 of them in a piece on Wednesday if you’d like to sniff around for more speculative ideas in the space, and Barron’s wrote earlier in the week about the nine ongoing vaccine programs that are making some progress.
I’m crossing my fingers that there will be some huge successes, and I trust that science will improve the coronavirus picture at some point over the next year, but I’m not betting on any of the individual players in this race. If you are, or think some of these companies are more appealing than others, please do let us know with a comment below… thanks for reading!