© Reuters. Concept Tracker | The Monkeypox Epidemic Continues To Ferment These Low-Valued Concepts Can U.S. Stocks Rise?
Zhitong Finance APP has learned that due to the recent outbreak of monkeypox, a “close relative” of the smallpox virus, the capital market seems to have begun to hype “monkeypox concept stocks”, and the stock price of American pharmaceutical companies focusing on smallpox virus vaccines and treatment methods achieved a significant increase last week. rise. However, the recent share price performance and valuation of such concept stocks suggest that there may be further upside ahead.
Monkeypox outbreak triggers a surge in concept stocks
Monkeypox is known to be a rare viral disease prevalent in Nigeria, the Democratic Republic of Congo and the Central African Republic. Although the virus does not spread easily from person to person, it has a mortality rate of between 1% and 15%, and the smallpox vaccine provides 85% effectiveness in preventing monkeypox.
More than 80 cases of monkeypox have been confirmed in at least 12 countries, with another 50 cases pending confirmation, the WHO said on Friday. The group described the recent monkeypox outbreak as “atypical” because the cases occurred in countries not endemic for monkeypox, but U.S. officials in New York said on Friday they were monitoring a suspected case of monkeypox in the city. In fact, the United States confirmed its first monkeypox infection last Wednesday, following sporadic cases in Europe.
While routine smallpox vaccinations have been discontinued in the United States following the eradication of smallpox in 1972, young people may be at risk in the event of a monkeypox outbreak.
That statement underpinned the stock performance of pharmaceutical companies focused on smallpox vaccines and treatments. Over the last week, drugmakers SIGA Technologies (SIGA.US) and Chimerix (CMRX.US) rose 68% and 41%, respectively, while vaccine makers Emergent Biosolutions (EBS.US) and Bavarian Nordic (BVNRY.US) The increase was 23% and 79% respectively.
Separately, smallpox vaccine developer Tonix Pharmaceuticals (TNXP.US), which previously announced its fifth reverse stock split in history, also edged up 32% in the last two trading days of last week due to an increase in monkeypox cases.
There is still room for further upside
Although most concept stocks achieved a certain degree of gain last week, if viewed from the valuation, there may still be further room for the stock price of some companies to rise.
For example, looking at EV/Sales, Emergent Biosolutions currently trades at about 1.7 times earnings, which is about a 44% discount to its 5-year average. In terms of performance, in 2020, although the company’s ACAM2000 smallpox vaccine sales fell by about 17% year-on-year, its net profit increased by more than five times. After a further 3% year-over-year decline in 2021, Emergent Biosolutions set its 2022 guidance for smallpox vaccine sales at $190 million to $210 million, compared with $206.5 million in sales for the company’s smallpox vaccine last year. This modest forecast suggests that guidance could be revised upwards if monkeypox spreads in countries where it is not currently endemic.
In addition, from a stock price perspective, while SIGA Technologies has significantly outperformed other companies in the past 12 months, with an increase of about 87%, the shares of competitors Emergent Biosolutions and Chimerix have fallen by more than 39% and 70%, respectively. It further highlights the extent to which underestimation is affected by the future evolution of the outbreak.