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Stocks  | February 26, 2020

Fears of a coronavirus pandemic sent the markets into a tailspin on Monday with all three major indexes registering heavy losses. Additionally, oil dropped by 4%, and the European equities markets had their worse performing day since mid-2016. In contrast, gold – traditionally a safe haven asset - notched a seven-year high, while the CBOE Volatility Index (VIX), the Street’s fear gauge, shot up by over 46%.

The virus has now spread further afield, with the death toll rising to seven in Italy and dozens of deaths reported in Iran. Amidst all the chaos, the search is on to find a cure and contain the outbreak. In a market gripped by turmoil, though, certain companies in the Healthcare space stand to make headway if they can find a solution or stop the virus claiming more lives.

With this in mind, we sought out three names currently in the hunt for a viable treatment or engaged in mitigating its impact. With a little help from TipRanks’ Stock Screener we were able to gauge the Street’s current sentiment towards all three. Let’s take a closer look.

Moderna Inc (MRNA)

This clinical stage biotech is hogging the headlines right now, and for good reason. Moderna disclosed yesterday that its experimental mRNA COVID-19 vaccine (mRNA-1273) is ready to be human tested. The first batch has now been sent to the National Institute of Allergy and Infectious Diseases (NIAID). Clinical trials should begin in late April, with initial results expected in July or August. In reaction, MRNA stock is up nearly 15% in pre-market trading.

Moderna is developing mRNA therapies to treat autoimmune diseases. Hypothetically, mRNA vaccines are faster and more effective than DNA-based ones. Unlike DNA-based vaccines which must connect with the nucleus of the cell, mRNA (messenger RNA) is found all across the cell and, therefore, is significantly more accessible. We say “hypothetically” as mRNA vaccines have yet to be tested on humans and it’s still unclear how effective the new coronavirus vaccine will be.

Piper Sandler’s Edward Tenthoff is bullish on Moderna and notes that the company is “the leader in developing mRNA medicines.” The 5-star analyst expounded, “Moderna and VRC finalized sequences to be used in mRNA-1273 and manufacture of the first clinical batch was completed on February 7th. This showcases the speed of Moderna’s mRNA vaccine development capabilities, which starting from concept design to scale up manufacturing, was done in 25 days… We believe Moderna’s mRNA vaccine platform is ideally suited to address emerging viral outbreaks. In this regard, Moderna can rapidly advance from sequence to vaccine and manufacture scale up; all of which are crucial in responding to public health threats.”

To this end, Tenthoff reiterated an Overweight rating on Moderna stock and kept his price target of $32 as is. This conveys the analyst’s belief that shares can soar by a further 72% in the coming months.

Looking at the consensus breakdown, all 6 analysts tracked over the last 3 months rate the vaccine pioneer as a Buy. Moderna’s Strong Buy consensus rating is accompanied by an average target price of $31.20 and implies potential gains in the shape of 68%.

Co-Diagnostics Inc (CODX)

Co-Diagnostics provides molecular diagnostics technology that is used to detect diseases and advance life sciences research. The micro-cap has a market value of only $98 million, but if it continues 2020’s performance so far, it won’t be a penny stock for long. CODX is up by a mercurial 339% year-to-date. Yesterday the stock spiked by 29%.

So, why amidst all the sell off, is this small company doing so well? The simple answer is that Co-Diagnostics has developed a test for the diagnosis of coronavirus. What’s more, the test has just received European regulatory approval. Co-Diagnostics’ Logix Smart Coronavirus Covid-19 Test got regulatory clearance to be an in vitro diagnostic in markets that accept CE (European Community) marking. The company plans to ramp up production to meet global demand and will turn its focus to obtaining approval form other bodies. Co-Diagnostics noted it is the first U.S. company to receive a CE-marking for a coronavirus IVD.

Maxim’s Jason McCarthy is impressed with the speed of execution: “The company has demonstrated the ability to rapidly develop tests for emerging diseases like Zika and Ebola, and now the coronavirus, thereby highlighting the versatility of its platform, as well as demonstrating that the company will be able to develop tests for future emerging outbreaks. Considering the platform, the versatility of the testing, the unique CoPrimer approach, and the valuation of the company (despite rising in 2020 with activity in coronavirus), there is still more upside in CODX shares, in our view.”

The high praise is mirrored in the 4-star analyst’s actions; McCarthy reiterated a Buy on CODX, while also raising his price target, up from $2 to $5. Should the target be met over the next 12 months, investors stand to pocket a further 27% gain.

Over the last 3 months, only one fellow analyst has published a review regarding Co-Diagnostics’ prospects. The additional Buy rating, though, means CODX has a Moderate Buy consensus rating bestowed upon it. The average price target hits $4.5 and implies possible upside of 14.5%.

Vir Biotechnology (VIR)

Another company making waves right now is Vir Biotechnology. VIR stock soared by over 16% yesterday, adding further muscle to a strong performance so far in 2020; year-to-date Vir‘s share price has increased by 51%.

The company’s aim of ‘a world without infectious diseases’ resonates in these times. The clinical stage biotech is focused on preventing serious infectious diseases by combining immunologic insights with cutting-edge technologies; It uses four technology platforms to develop treatments for various diseases including influenza and tuberculosis.

The reason behind Vir’s recent surge is down to new research which identified 2 monoclonal antibodies (mAbs) that bind to SARS-CoV-2, the spike protein in the region that the virus uses to enter cells. These were originally found because they bind and neutralize the original SARS-CoV. The company is continuing its research to determine whether these or additional antibodies can be effective treatments for the coronavirus.

J.P. Morgan’s Anupam Rama commented, “Near-term, based on our conversation with the company, the strategy around Wuhan coronavirus is evolving (i.e., a drug candidate via the antibody platform or otherwise would need to be identified, examined, and manufactured, for which the timelines are unclear) and the impact to our model is uncertain at this point… in the near-term, VIR shares could be volatile, and we would await a better entry point before adding to positions (or creating a new position)."

Accordingly, Rama downgraded his rating from Overweight to Neutral. The price target, though, gets a slight bump upwards, from $25 to $26. Despite the downgrade, the new target implies possible upside of 37%.

It has been relatively quiet when it comes to other analyst activity. Overall, in the last three months, only 2 analysts have issued ratings. The word on the Street is that VIR is a Moderate Buy based on 1 "buy" and 1 "hold" rating. In addition, the average price target of $25.50 amounts to 34.5% upside potential.

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