This month, the U.S. declared monkeypox a public health emergency, and people at high risk of getting the virus are lining up in city streets to get vaccinated. Investors are lining up for shares of companies supplying vaccines as well as companies developing treatments and “pick-and-shovel” diagnostic, testing and preventative companies. There are several options for investors looking to profit from this latest outbreak.
“There is heightened focus on these types of outbreaks and diseases,” said Chris Meekins, a healthcare policy analyst at Raymond James. “Where we have been historically, it’s just the attention is greater.”
Monkeypox is a smallpox-like disease caused by the monkeypox virus. Both viruses share the same genus: Orthopoxvirus. Originally relegated to certain central and western African countries, the disease has spread. Within months of the first warnings out of Europe, more than 14,000 people in the U.S. have been diagnosed with the poxvirus, which was first detected in 1970 and has been endemic in parts of Africa. About 40,000 people worldwide have tested positive, and 12 have died.
With the U.S. declaring a public health emergency, companies in the monkeypox space stand to benefit.
TESTING & DIAGNOSTICS COMPANIES PROVIDE THE FIRST LINE OF DEFENSE
Ancillary or "pick and shovel" companies focused on testing, diagnostics, and preventative measures may provide one of the most effective solutions to the spread of monkeypox. According to CNN, “Testing is a major part of the monkeypox containment effort for two reasons: It’s the first step to identifying and isolating patients, and it gives public health officials an idea of the scope of the outbreak and which geographic areas need the most resources.”
Currently, five commercial laboratory companies have been cleared to receive HHS orthopoxvirus tests — Aegis Science, Labcorp (NYSE: LH), Mayo Clinic Laboratories, Quest Diagnostics (NYSE: DGX), and Sonic Healthcare (OTCMKTS: SKHHY, OTCMKTS: SKHCF, ASX: SHL)— to increase monkeypox testing capacity and access.
Sonic Healthcare is the latest company to receive testing approval, the Australian company just announced record numbers for fiscal 2022. Its revenue was up to $9.3 billion, a 7% on the prior year; EBITDA and net profit were up 11% at $2.8 billion and $1.5 billion; 3% of the growth was attributed to COVID testing, and investors could anticipate growth in 2023 based on its monkeypox testing.
One company creating a comprehensive diagnostics and testing solution, Todos Medical, Ltd. (OTCMKTS: TOMDF), announced last week that its Atlanta-area CLIA/CAP-certified clinical laboratory Provista Diagnostics, Inc. is now offering saliva-only MonkeyPox testing. The saliva-based samples collected must be stored in the refrigerator within 1 hour of collection and be shipped with cold packs to arrive at the lab within 72 hours of sample collection. The lab has a result turnaround time of 24-48h from the time the sample arrives at the lab.
TOMDF’s Provista saliva MonkeyPox test is available in all states, with the exception of New York. The Company expects to be able to offer MonkeyPox testing in New York following a late September inspection by the New York Department of Health (NYDOH).Of the above “pick-and-shovel” plays, TOMDF may have the most upside for investors. As one of the more speculative plays in the bunch, its volatility can create drastic price swings which traders can benefit from, and long-term investors can utilize to minimize their entry price.
THERAPIES & TREATMENTS HELP DEAL WITH THE FALLOUT FROM THE INITIAL SPREAD
Monkeypox therapies and treatments will be leaned on heavily in the short term, as the healthcare community is tasked with treating those who have contracted the virus. One of the best ways to play the treatment angle is commercial-stage biotech Chimerix, Inc. (NASDAQ:CMRX). CMRX announced Monday that it has reached a multi-year deal with the Biomedical Advanced Research and Development Authority, an office within the U.S. Department of Health and Human Services. The deal includes an initial procurement of 319,000 courses of its Tembexa treatment for about $115 million and options for future procurements.
The 10-year contract is valued at about $551 if the government exercises all of its options. It also supports $13 million in post-marketing activities for each procurement, giving the contract a potential value of up to $680 million, Chimerix said.As a result shares of the biotech company surged 20% in the morning hours Monday
VACCINES ARE USUALLY THE BEST LONG-TERM SOLUTION
While testing and diagnostics should stop the spread, and treatments will relieve the infected, widespread vaccinations should help eradicate the disease over time. The best way to play this space is probably Bavarian Nordic (OTCMKTS:BVNRY), the “world’s sole supplier of a licensed vaccine for monkeypox.” HHS ordered an additional 2.5 million doses of Bavarian Nordic’s Jynneos vaccine to strengthen preparedness. This followed an earlier order made for 2.5 million doses that will begin arriving over the next year and will bring the federal stockpile of vaccines to treat monkeypox to nearly 7 million doses by mid-2023.
Prior to the monkeypox outbreak, Bavarian Nordic (OTCMKTS:BVNRY) was a relative ‘unknown’. Based in Denmark, the company has “worked for nearly two decades to develop a (monkeypox) vaccine”. After a tepid response initially, with the latest outbreak the company “is looking at whether it can operate 24-hours a day, seven days a week, to meet demand.”
If you are looking for a domestic vaccination play, Emergent BioSolutions (NYSE:EBS) has developed its ACAM2000 vaccine. According to the Centers for Disease Control and Prevention, ACAM2000 features approval for “immunization against smallpox disease and made available for use against monkeypox under an Expanded Access Investigational New Drug (EA-IND) protocol.” In 2019, the company received a 10-year contract with the U.S. Department of Health and Human Services to supply ACAM2000. The value of the contract is approximately $2 billion. The biotech company operates at a 13.7% profit margin, far outpacing the industry median of 6%.
CONCLUSION
While public health crises are unfortunate and have occurred far too frequently over the past few years, investing in public companies that are fighting these viruses and diseases may be one of the best ways to ‘do-your-part’. Investors seeking intriguing diagnostics plays in the monkeypox space should start their research with Todos Medical (OTCMKTS: TOMDF), the hottest treatment play is likely Chimerix (Nasdaq: CMRX), and vaccination players should look to Bavarian Nordic (OTCMKTS: BVRNY) or Emergent (NYSE: EBS).
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