Wyatt’s picks for “Coronavirus Biotech Boom?”

What's being teased in the webinar ads for his Million Dollar Portfolio service?

By Travis Johnson, Stock Gumshoe, March 16, 2020

Ian Wyatt has been out over the past couple weeks with some “webinars” in which he talks up the coronavirus outbreak (for an hour!) and then ends his show with a tease about several “special reports” on the stocks he thinks will make you a lot of money as we fight COVID-19… and, of course, those special reports come only with a subscription to his Million Dollar Portfolio service, which costs $995 and offers no refunds.

The numbers are all wildly speculative at this point, but Wyatt is talking about a coronavirus vaccine potentially being worth $16 billion in the US, then maybe $156 billion worldwide… and as we see so often in biotech pitches, he pushes the humanitarian angle as well, talking about how you can help this vaccine be developed by investing in the companies who are developing that vaccine while you’re also making buckets of money.

The basic gist of the spiel, which he has repeated in a couple “webinars” in the past week or two and is offering again this Wednesday, is that this is going to lead to a biotech rally — we’ll see investors flood into biotech and pharmaceutical stocks.

And he gives some examples of stocks that profited from past panics, like Sarepta Therapeutics (SRPT), NewLink (NLNK) or BioCryst (BCRX) during the ebola panics from a few years ago… or Cerus (CERS) and Biocryst again from the Zika outbreak. He says those 10 speculative picks averaged 700%+ returns for investors at the time. (Though we should add a cautionary note here, too — lots of those “story” stocks tied to specific scary outbreaks also collapsed even more dramatically once the story passed… the finances of treating or preventing disease are not always as immediately compelling as the news flow of finding a “cure,” NewLink and BioCryst are both down 90% or so from their Ebola highs.)

And he opens it up by saying that biotech in general will do good, so you could at least start there — Wyatt thinks the iShares Biotechnology ETF (IBB) to outperform the market “quite handily” in the coming year.

And Big Pharma is probably reasonably appealing too. Companies like Johnson and Johnson (JNJ) are working on coronavirus vaccines… but they’re already huge, so even if a vaccine is a big success it will have “very little actual impact” on the company’s financial results.

So option three is, of course, what Wyatt is really selling here — his skill at finding the best little biotech stocks for you to ride a COVID-19 wave.

And he drops a few hints about them, so let’s get a few names for you to research, without sinking $995 into a nonrefundable purchase that you might regret… and that will at least skew your thinking (if you spend $995 on the subscription, you’ll probably be very biased toward buying the stocks immediately to justify that purchase).

So what are we told about the first one?

It’s a leading biotech stock. It was initially funded by venture capital, and is focused on antivirals. The company is led by a nobel prize laureate for genetics work, and they’re working to repurpose an existing drug for coronavirus, so they already have some progress under their belts.

And he says they’re right now starting a phase 3 study with 900 patients infected with COVID-19 — with early results expected in a couple months.

Wyatt concludes that “This grossly undervalued stock remains a bargain today, could have huge gains by late April.”

This must be Gilead (GILD), which is probably the most prominent large antiviral company — and is also, coincidentally enough, the largest component of the iShares Biotechnology ETF (if you buy IBB, about 9.5% of the money you invest is buying GILD shares). The shares are well off their highs of 2015, mostly because of the declining sales of their Hepatitis C drugs (Sovaldi and Harvoni) as those populations who were relatively easy to cure with those drugs washed through the system pretty quickly.

And yes, they’ve been in the headlines this year because one of their experimental drugs, remdesivir, has shown initial promise in some early “compassionate use” cases for COVID-19 patients, and is being tested in some larger cohorts right now to see if it’s relatively safe and effective in treating this new viral disease. That 900 patients bit isn’t exactly accurate, it’s more like 1,000 at this point who they intend to treat in the trials, but it’s close and that’s from his speaking, not from any written materials. Likewise, Gilead is not currently led by a Nobel laureate, but has had several Nobel Prize winners on its board in the past.

It’s also true that Gilead looks quite undervalued compared to most biotechs and many pharmaceutical companies — that’s mostly just because they aren’t expected to grow their revenue over the next few years, and companies that don’t grow have lower PE ratios, all else being equal, than companies with robust revenue and earnings growth. As with many larger biotech and pharma names, it’s mostly about maximizing their revenue from blockbuster drugs and managing the pipeline so that new drugs can be approved to replace drugs that lose their patent protection and go generic (or, like Gilead’s Hepatitis C drugs, see a declining market).

Gilead doesn’t have any net debt (cash and debt are roughly equal), and it is nicely profitable and pays a good dividend, so that looks fairly attractive these days when investors are suddenly more worried about “survival” than “growth,” but they are not all that likely to get a huge financial boost from COVID-19 this year. It’s possible that remdesivir will be a hugely successful treatment for the disease, and I hope it is, it showed some success with MERS and SARS after failing to be effective against Ebola and has some safety concerns but still seems to be at the top of the list of “most hopeful” drugs right at the moment… but even if that’s the case, it’s not certain that Gilead would push it through with windfall pricing or turn it into a mega-blockbuster in the next year or two.

I have no idea how it will work out, but Gilead is a strong company with a lot of financial flexibility and huge resources in developing antiviral drugs, so I wouldn’t try to talk you out of it — just keep in mind that any short-term moves the stock might have (so far it has clearly reacted to the COVID-19 news but is mostly just doing “less bad” than the market, not rocketing higher), are likely to be story-driven more than financials-driven, it takes a few billion dollars to really make an impact on GILD’s revenue line. And on the flip side, of course, some disappointing results from these remdesivir trials could take a lot of wind out of their sails.

So the remdesivir “story” is both the upside and the downside potential for Gilead — here’s a chart of Gilead compared to the iShares US Pharmaceuticals ETF (IHE) year-to-date — you can see that GILD (in blue) has done well during the coronavirus panic while most of big pharma has not… which means that if GILD loses it’s “story” position in relation to coronavirus because remdesivir turns out to be too dangerous, or doesn’t work in these trials (we’ll know more