Investment U Explains: How to Ebola-Proof Your Portfolio
Investors Get Bullish on Ebola Cure Stocks
By Tom Sandford
Originally published October 10, 2014
On September 30, the Centers for Disease Control and Prevention announced the first confirmed case of Ebola in the U.S.
The disease has sickened more than 8,000 people since it flared up in Africa earlier this year, and 3,800 have died.
One bright spot, however, is that it put cure-developing companies in the spotlight. In fact, the CDC’s announcement sent select biotech stocks soaring.
Some have risen by as much as 20%. Here are the ones you should know about.
Banking on a Cure
Currently, there is no market-approved cure for Ebola. But there are trial treatments, as biotech companies vie to be the first to find an effective cure. And there will be plenty of cash on hand to help.
According to the World Health Organization, world governments will likely spend $1 billion to contain the virus within the next nine months. Stockpiling drugs is also an imperative, as health officials said they’d be hosting clinical trials in West Africa.
Arguably the most well-known treatment is ZMapp, a drug created by Mapp Biopharmaceutical. It was credited with curing two health workers in August, but its treatment supply has since run out.
Even with a $25 million contract to fast-track production from the government, scientists say they can work only so fast. They may only be able to create a few hundred treatments by early next year.
Naturally, attention has turned to other treatment developers. One of them is Tekmira Pharmaceuticals Corp. (Nasdaq: TKMR). Its treatment, code-named TKM-Ebola, is still in trial phases.
The treatment received real-world feedback when it was used to treat the third person to be transported to the U.S. from Africa for treatment. The stock shot up 23% to $25.90 after the announcement.
But before jumping on the Tekmira bandwagon, see how the company stacks up on the Investment U Fundamental Factor Test.
Another company on the tips of analysts’ tongues is Sarepta Therapeutics Inc. (Nasdaq: SRPT). It has a $812 million market cap, and a share price of $19.85 as of October 9. That’s almost directly between its 52-week high and low.
On September 30, CEO Chris Garabedian says the company has about 100 treatments ready to go. Each has an effective rate of 60% to 80% in monkeys. That same day, Sarepta’s stock rose by 7% in late trading.
Other companies developing Ebola cures include BioCryst Pharmaceuticals Inc. (Nasdaq: BCRX), Hemispherx Biopharma Inc. (Amex: HEB), NewLink Genetics Corporation (Nasdaq: NLNK) and GlaxoSmithKline PLC (NYSE: GSK).
A Focus on Containment
Analysts expect pharma stocks to rise and fall in a stilted manner, due to news on Ebola treatments. This will continue until a cure is found, or Ebola has been managed to a minimum, as was the case with the 2009 H1N1 “Swine Flu” pandemic.
All are open to investment, but volatile. Until a treatment makes it to mass production, the field is wide open.
For other options, look to secondary companies not directly involved in the search for a cure for Ebola. For example, Lakeland Industries Inc. (Nasdaq: LAKE) is a $94 million market cap company that makes hazmat suits.
The stock surged this week on growing Ebola fears and as the U.S. government reportedly ordered 160,000 suits from the company destined for Africa.