Monkeypox outbreak may boost handful of companies

Sun, 31 Jul, 2022 - 21:37

Abhishek Vishnoi, Bre Bradham, and Jonas Ekblom

As health authorities all over the globe search for ways to stop the monkeypox outbreak, investors are snapping up shares of companies that could benefit from the race to quell the disease.

Shares of vaccine producers, antiviral drug makers, and protective equipment manufacturers are in demand as investors tap a strategy that delivered gains during the coronavirus pandemic.

Biotechnological company Bavarian Nordic and pharmaceutical firm Siga Technologies are among the stocks in focus as well as medical tools supplier, Precision System Science.

While nowhere as severe as the Covid-19 outbreak, the spread of monkeypox infections across more than 70 countries in just a few months has prompted the World Health Organization (WHO) to declare it as a global emergency. This pronouncement may give the trade an extra tailwind.

“At the moment, the world is relying on one manufacturer, Bavarian Nordic, for the monkeypox vaccine,” said Manish Bhargava, a fund manager at Straits Investment.

To keep up with demand, we can expect other biotech firms to ramp up research and production. It’s starting to reflect in the strong stock price performance for the sector.”

Shares of Bavarian Nordic have more than tripled from a low in May after governments began ordering the Danish company’s monkeypox vaccine — the only one approved specifically to ward off the infection. The firm raised its revenue guidance several times this year.

Analysts are taking note, with Citigroup increasing its target price for the company’s stock by 20% and flagging that there may be further upside if more orders come through.

Shares of other companies making vaccines or antivirals for monkeypox have also caught the attention of traders. The stock of Siga Technologies, which manufactures a treatment called Tpoxx, doubled this year. The therapy is approved to treat smallpox in the US, and monkeypox and other viruses in the EU and the UK.

Chimerix’s Tembexa is a countermeasure that is used to treat smallpox, and the firm said in May it would sell the drug to Emergent BioSolutions. On the vaccine side, Emergent’s Acam2000 is a smallpox vaccine that can be utilised in some cases against monkeypox.

Siga, Chimerix and Emergent are the “key beneficiaries” of the WHO’s declaration that the monkeypox outbreak is a global emergency, according to Cowen analyst Boris Peaker.

“With increased resources allocated to contact tracing and testing in EU and US, we anticipate the case count to rise significantly over the next few months, potentially leading to more procurement of countermeasures,” Mr Peaker wrote in a note.

Japan has also started studying smallpox vaccines as a way to prevent the spread of the outbreak, and this may ignite interest in Meiji as its unit KM Biologics produces a smallpox vaccine. Meiji shares have jumped 12% from a June low.

The Asian nation has a stockpile of smallpox vaccines but the amount has not been disclosed while preparations for administration of Tpoxx are progressing, Citigroup analyst Hidemaru Yamaguchi wrote in a note. Firms that provide virus testing kits and tools are also in focus.

In Japan, shares of Precision System, which makes medical testing equipment, have almost doubled since late June. Switzerland’s Roche said in May it had developed three test kits to help scientists trace monkeypox.

Virus detection products

More than 30 companies in China have obtained EU certification for their monkeypox virus detection products, Jefferies Financial Group analysts, including Christopher Lui wrote in a research note last week.

These include early movers such as Autobio Diagnostics, Shanghai ZJ Bio-Tech, and Daan Gene Shanghai. Makers of antigen and antibody test kits such as Zhejiang Orient Gene Biotech and Assure Tech are the other potential beneficiaries.

WHO director-deneral Tedros Adhanom Ghebreyesus last month personally intervened after nine members of the expert committee were against declaring the monkeypox outbreak an emergency, while six were in favour. The health organisation had faced criticism in some quarters that it had acted too slowly to ratchet up the alarms on Covid.