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 probably around the end of April, they haven’t said exactly when they’ll publicize results but presumably this will all move as quickly as possible), then Gilead in this environment would be “just another big drug stock” and might join its cohort down there along that orange line.

GILD Chart

And how about “number two?” Wyatt says that this stock recently went public in an IPO, is the “number one government approved biotech,” got capital from one of the best venture capital firms in the world, and has raised over $1 billion in capital. He says it’s a small company, with a low share price, and is well-funded.

A couple other quotes from the presentation last week:

“One well-known pharma company has put over 100 million into their technology, gives them a partner for rolling this out (and could acquire them).”

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They’re “Working with researchers at a top government health agency”

And we’re told that they’ve already delivered the vaccine, with plans to test it on over 20 people by April… and that “this is a world record,” a new drug ready for human testing in three months.

Wyatt also noted that the stock has already gone up 50% this year, but that’s just the beginning even if this is an “average” stock for the outbreak (compared to those Zika and Ebola winners) — it could easily jump another 700-800%, he says.

This one is almost certainly Moderna (MRNA), which actually beat that April deadline by starting to test their coronavirus vaccine in healthy volunteers today (March 16). That is indeed a “world record” for going from development of a vaccine (or a drug of any kind) into human trials, they just completed the sequence for the drug, in partnership with the NIH, in mid-January, and the first clincal batch was created on February 7, with the FDA completing their review in a few weeks and approving clinical trials to start on March 4.

And that’s both a very hopeful sign about the ability of large institutions to move quickly in a crisis, and a very brave volunteer who got that first dose today. Hopefully it works fantastically well, though I have no idea how quickly we can go from this first patient to saying “sure, it’s safe to give this to a few billion people,” and there will be a lot of scrutiny on this vaccine from day one. Vaccine development and manufacture is usually quite slow and careful, since by definition you’re giving this preventative to massive numbers of healthy people and you have to weigh the risks of the disease against the risk of the vaccine, so even if that speeds up I assume regulators will still be careful. The stock surged 20% or so on news of the dosing of that first patient, so it will probably continue to be very volatile with each bit of news.

Next? Number three is teased thus:

“Tiny $5 biotech getting millions from Bill Gates” for a “groundbreaking vaccine”

This company is, we’re told, focused on using the human genome to create vaccines for cancer, infectious disease and viruses. Has already worked on MERs, and already has a vaccine in clinical trials.

From my notes on the recorded presentation:

“Within a couple days of outbreak they started mapping the virus and plan to begin trials in April or May and could ramp up to deliver over 900,000 vaccines by the end of the year. Gates has invested over 10 million.”

And Wyatt says that there are some big institutions on board with this one as well, including large holdings by Morgan Stanely, Wasatch and Blackrock.

He thinks they’ll release one of the first covid-19 vaccines, could go from $5 to $60, and should be “the biggest winner of the coronavirus boom” … so who is it?

This is almost certainly Inovio Pharmaceuticals (INO), which is indeed a $5 stock… though it was a $14 stock a couple weeks ago, and a $2 stock last Fall, so be prepared for a wild ride. Like Moderna, Inovio is a long way from having any approved products but does have a coronavirus vaccine program which has collaborated with both US and Chinese health care agencies and could, they say, be in clinical trials as early as next month. That news is what sent the stock spiking a couple hundred percent in late February and early March, though as of today it appears that the larger Moderna has stolen some of that thunder with their “first to dose” accomplishment.

And also like Moderna, Inovio has gotten funding from the Gates Foundation — which is not at all the same thing as saying “Bill Gates bought the stock.” Moderna has a partnership with the Gates Foundation to help fund some vaccine development, with possibly as much as $100 million coming their way (this predates the coronavirus news, so presumably they’re talking about lots of infectious diseases), and Inovio just got a $5 million grant last week to help fund their coronavirus vaccine testing.

The first trial of a vaccine is obviously important, but there will be several COVID-19 vaccines tested over the next few months (and years, probably), led by these initial tests from Moderna and Inovio but probably followed by lots of others, and “what works” is going to end up mattering a lot more than “who’s first.”

This is not a surprise list… the three “secret” stocks Wyatt is hinting at in his presentation last week, and presumably the presentation later this week will be almost identical, are also the three top COVID-19 stocks that pretty much any pundit would pull out of his hat if questioned — and they’re designed to appeal to everyone, you’ve got the big pharma company that pays a dividend (GILD), the hot IPO with good funding (MRNA), and the little wild card (INO).

And it’s very early days for this new disease, there will be more — as soon as there’s some more testing and the data and samples get to enough researchers we’ll see every biotech and pharma company with any antiviral drugs in their pipeline testing those drugs against the coronavirus, for both humanitarian and business reasons. I wouldn’t try to talk you out of speculating on these news events, that can be fun and occasionally profitable if you are fortunate with your timing, and we all need something to do while we’re stuck at home… but I won’t personally be investing in these, and if I did I’d lean toward Gilead, since it at least has some revenues and a balance sheet that I can understand. Hopefully some excellent COVID-19 antivirals will be identified in the next few weeks and months to help us get through this initial surge of patients, then a solid vaccine that we might be able to count in perhaps in 2021, but I can’t say that I’m really interested in betting on a winner in this race… I hope they all win, and I know my heart is not in the “let’s get rich from this” story, but that’s also easy for me to say because I don’t generally dabble in drug developers

(Why avoid biotechs, you ask? As an investor, it helps to know where your zones of stupidity are, and one of mine is certainly biology in general, and drug development specifically… when you know you’re buying stock from someone who understands the company better than you do, that’s a bad sign.)

But I know we’ve got plenty of short-term traders in the bunch, and lots of folks who know biotech investing better than I do, so feel free to jump in and share your thoughts — do you see bright things ahead for these three coronavirus “story” stocks, or do you have others in mind who show a lot of promise? Let us know with a comment below.

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March 22, 2020 11:29 am

I’ve been nibbling at Teladoc Health (TDOC) during this crisis and that’s my only stock showing profit and promise. Surprise that wasn’t mentioned.

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