Every time there's a new epidemic, the epidemic infects not only just its victims, but also investors. I've had the symptoms myself more than once, as I feverishly google for stocks which might be pumped into unhealthy levels.
This time is no different. The names change, now it's the Zika virus, but the reaction stays the same. The game is to find the right stock and get in early, so that others might take it off your hands later, preferably at a much higher price.
So what is that stock today, now that WHO (World Health Organization) is telling us the Zika virus is spreading explosively and there are already 3-4 million infected? As a matter of fact, I can already answer this question, my fever having subsided for long enough to report my findings.
The stock is Inovio Pharmaceuticals (NASDAQ:INO). Inovio, quite fortuitously, has just announced it's hot on the tail of the Zika virus by partnering with GeneOne Life Science, a company that's listed in South Korea.
Obviously, with WHO putting out emergency press releases, you cannot expect to get into this World War Z preventer at a cheap price, so as I write this, the stock is already up 12% to $6. Mind you, given the nature of these things, it might well head a lot higher, and I am sure you're already happy that I saved you the due diligence in even finding the right stock for the right virus.
My Due Diligence Didn't End There, Though
I would have been a happy camper if I had stopped. I should only have read the title on the press release and be done with it. I would be on my way to virulent riches, if I had done so. Unfortunately, I actually opened the press release. And read it.
That's when things got interesting. In the second paragraph, we get this (emphasis is mine):
Inovio and its collaborators are leveraging their past experience in designing and testing novel DNA-based vaccines for related viruses including the West Nile, dengue, and chikungunya viruses. Moreover, Inovio and GeneOne are currently collaborating on two phase I stage vaccine candidates for severe infectious diseases: INO-4212, a vaccine for Ebola infection and GLS-5300, a vaccine for MERS infection. The Zika virus vaccine candidate is currently undergoing preclinical animal studies to evaluate its immunogenicity.
Damn, that's a lot of coincidence. It's like these two companies are collaborating on every emerging threat to humanity right there, I thought. Let me see when these were announced.
Vaccine for Ebola
Collaboration with GeneOne announced on September 24, 2014.
Here's how interest on Ebola was evolving - it flagged somewhat during September but the crisis was still to hit its "media interest peak".
Source: Google Trends
Vaccine for MERS
Collaboration with GeneOne announced on June 3, 2015.
Here's how interest on MERS was evolving - we were right in the middle of the "media interest peak".
Source: Google Trends
Three strikes and you're out. This is the third time in two years that INO and GeneOne collaborate right in the middle of an emerging media frenzy. These are too many coincidences for me, and that thought informs my take on the situation.
My take is that these collaborations with GeneOne are basically an attempt to focus attention on these two companies. They're part of a promotion scheme. It is too much of a coincidence that every epidemic suddenly has INO interested in it and developing work for it.
In the current epidemic, this means that INO can easily be speculated upwards significantly, but it will end up coming back to earth "and then some". So if you are speculating long on INO, be aware that it doesn't seem to have much substance as it pursues every epidemic just to focus attention on the stock.
This is somewhat amazing in itself, as other than this weird trend towards pursuing "interest epidemics", INO doesn't even seem the worst of promotional biotechs out there.
INO is the one stock that's positioned most clearly to be a target of speculative attention during the Zika epidemic.
However, past collaborations with GeneOne seem to highlight a pattern where INO (and GeneOne) positions to take advantage of every recent epidemic. This makes it very likely that none of these vaccines are actually developed to inoculate patients against the ravages of the diseases. Instead, these experimental vaccines seem more geared towards provoking fever-like symptoms in investors.
Moreover, before any such Zika vaccine is ready, it's likely that the current outbreak will already have died down.
This is likely not to end well, even though it might well result in a much bigger rally in the stock in the meantime.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.