Ebola and These Pharmaceutical Stocks
4 Stocks to Look at via Ebola Crisis by Zacks Investment Research
The current outbreak of Ebola that originated in Guinea in Dec 2013 has become a global concern now. After affecting the lives of 8,000 to 9000 people in West African countries (Sierra Leone, Guinea, Nigeria, Senegal and Liberia, Democratic Republic of Congo), the deadly disease has hit the U.S. with the first case diagnosed on Sep 30, 2014 in Texas.
Thomas Eric Duncan was the first person to be diagnosed with Ebola in the U.S. Duncan, who had flown to Dallas from Liberia, died of the disease on Oct 8. Both the nurses who took care of Duncan at the Dallas hospital tested positive for Ebola but have now been declared free of the virus. Currently, only one doctor, back from Guinea after treating Ebola patients, is being treated for the disease.
How Did It Begin This Time?
Fruit bats generally carry the Ebola virus without being infected themselves. Once human infection occurs, the disease may spread through close physical contact with the bodily fluids of someone who has been infected and showing symptoms. The recent outbreak can be traced to a family that hunted bats and came into contact with the Ebola-harboring species.
After impacting Guinea, Liberia, Sierra Leone, Nigeria and Senegal, this disease is expected to spread to Benin, Cameroon, Central African Republic, Democratic Republic of the Congo, Gambia, Mauritania and Togo, according to the World Health Organization.
Economic Impact of the Outbreak
Economists and public health experts believe that the biggest economic impacts of the crisis are not the direct costs incurred for health care and other containment efforts but fearful behavior that results in far more economic damage. When people become skeptical, they change their behavioral patterns by not letting their children go to school, avoiding travel and visits to restaurants. This can have economic impacts.
Impact on Ground Zero - Africa
Per media reports, so far, Ebola has had a serious economic impact on Guinea, Liberia and Sierra Leone. IMF has lowered its growth expectation for Africa to 5% from 5.5% in 2014. The World Bank has further warned that if the situation is not brought under control, the West African economy could incur $32 billion in health care costs in 2015. It will also impact trade (timber, rubber, and coffee), tourism and agriculture in the affected regions.
Impact on U.S.-based Companies
Share prices of airline stocks like Southwest Airlines Co. (NYSE:LUV), JetBlue Airways Corp. (NASDAQ:JBLU), Delta Air Lines, Inc. (NYSE:DAL), United Continental Holdings, Inc. (NASDAQ:UAL) trading in the U.S. plunged after the second Ebola case in the U.S. The victim, a Dallas nurse, had taken a Frontier Airlines flight from Cleveland to Dallas a day before her diagnosis.
Leisure companies like The Walt Disney Company (NYSE:DIS) and Marriott International, Inc. (NYSE:MAR) have also been affected and lost significant value over the past few months as a large number of people have put their travel plans on hold.
Speculations that an Ebola patient could be traveling on the same cruise have impacted passenger travel, thereby taking a toll on cruise operators such as Carnival Corporation (NYSE:CCL) and Royal Caribbean Cruises Ltd. (NYSE:RCL). The share price of Carnival declined in the pre-market trading session on Oct 17 after news of a health care worker, who had handled a specimen of Thomas Eric Duncan -- who died of Ebola in Dallas - was reported to be traveling on one of Carnival's cruise ships. Share price of Royal Caribbean another cruise company also declined on similar concerns.
Ebola: A Blessing in Disguise for These Stocks
As all efforts are directed toward finding a cure for this disease, which has almost reached epidemic proportions, the spotlight now shifts to companies that are working on developing treatment for Ebola. We have zeroed in on four pharmaceutical stocks that are poised to benefit, if they come up with a proven cure.
Iowa based NewLink Genetics Corp. (NASDAQ:NLNK), a cancer drug company, has reportedly began long-awaited human trials for its Ebola vaccine at the Walter Reed Army Institute of Research in Maryland. The results of these trials are expected to come in December.
Moreover, the company is also planning advance trials in Africa. Share price of the company has soared 50% since the first Ebola case in the U.S. was reported. NewLink Genetics presently has a Zacks Rank #1 (Strong Buy).
Based in Connecticut, NanoViricides, Inc. (NYSEMKT:NNVC) is a nano medicine company that develops anti-viral drugs. Only last month, the company announced that it has executed a Collaborative Research and Development Agreement for Material Transfer with the United States Army Medical Research Institute of Infectious Diseases (USAMRIID).
Per the agreement, certain novel anti-Ebola nano medicine candidates recently developed by NanoViricides will be evaluated by USAMRIID scientists in their BSL-4 facilities for activity against the deadly Ebola virus. Share price of this Zacks Rank #3 (Hold) has jumped 19% since the first Ebola case in the U.S.
Pennsylvania-based Inovio Pharmaceuticals (NYSEMKT:INO) develops synthetic vaccines and immune therapies focusing on cancers and infectious diseases. Inovio Pharmaceuticals has announced plans to initiate human testing of a vaccine for Ebola in collaboration with GeneOne Life Science Inc. Share price of this Zacks Rank #3 stock has increased 14% since the first Ebola case in the U.S. was detected.
Based in North Carolina, BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) is a biotechnology company engaged in designing and development of small molecule pharmaceuticals that block key enzymes involved in the pathogenesis of diseases. BioCryst Pharmaceuticals is also reportedly planning to take its drug BCX4430 into a Phase 1 human clinical trial by early 2015. Shares of this Zacks Rank #1 company have risen 7% since Sep 30, 2014.
Moreover, other companies with potential Ebola candidates include GlaxoSmithKline plc (NYSE:GSK), Johnson & Johnson (NYSE:JNJ), Sarepta Therapeutics, Inc. (NASDAQ:SRPT) and Tekmira Pharmaceuticals Corp (TKMR).
Besides, companies that make hazmat suits masks and other protective gear are also poised to benefit. These include Lakeland Industries Inc. (NASDAQ:LAKE), Alpha Pro Tech Ltd. (NYSEMKT:APT) and The DuPont Co. Meanwhile though Kimberly-Clark Corporation's (NYSE:KMB) health care division does not make hazmat suits, it produces personal protection equipment, including face masks, face shields, isolation and surgical gowns and respirator masks, which are widely used to handle infectious disease outbreaks. Similarly, 3M Company (NYSE:MMM) is also a well known supplier of respirators - an important component in the fight against Ebola.
What Lies Ahead?
Per medical experts, despite efforts to contain further infections, new Ebola cases are expected to be reported in the U.S. by the end of the 2014 with more people (including doctors, nurses and health care workers) arriving in the country from Africa. It remains to be seen whether the efforts of the authorities in limiting the spread of the disease bear fruits in the near term. Meanwhile, we can only hope that the vaccine developing companies can come up with an antidote that can cure patients, thereby putting brakes on the spread of this epidemic.
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