Monkeypox plays indicate further upside as global toll climbs
May 21, 2022 12:00 PM ET Emergent BioSolutions Inc. (EBS) CMRX, BVNRY, TNXP, SIGABy: Dulan Lokuwithana, SA News Editor 12 Comments
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Pharma companies focused on vaccines and therapeutics against the smallpox virus surged this week amid an ongoing outbreak of its close relative, monkeypox. However, their recent price performance and valuations suggest further upside ahead.
The World Health Organization said on Friday that over 80 cases of monkeypox have been confirmed in at least 12 countries. Another 50 suspected cases are currently under investigation, according to the global body, which called the recent outbreaks “atypical as they are occurring in non-endemic countries.”
Meanwhile, the officials in New York said Friday they were monitoring a suspected case of monkeypox in the city. The U.S. confirmed its first monkeypox infection on Wednesday following reports of scattered cases in Europe.
Monkeypox is a rare viral disease endemic in Nigeria, the Democratic Republic of the Congo, and the Central African Republic. While the virus does not readily spread between humans, smallpox vaccines can offer 85% effectiveness in preventing monkeypox, which has a mortality rate ranging from 1% to 15%.
As the U.S. stopped routine smallpox vaccinations in 1972 following the eradication of the disease, the young Americans will become particularly vulnerable in the event of a monkeypox outbreak, a narrative that supported companies targeting smallpox this week.
Drug makers SIGA Technologies ( SIGA) and Chimerix ( CMRX) added more than 68% and 41%, while vaccine makers Emergent Biosolutions (NYSE: EBS) and Bavarian Nordic ( OTCPK:BVNRY) surged over 23% and 79%, respectively.
Despite announcing its fifth reverse stock split in history, Tonix Pharmaceuticals ( TNXP), a developer of a monkeypox vaccine, eked out a ~32% gain in the final two days of the week as the case counts increased. Valuations suggest further room for upside for some of the players.
In terms of EV/Sales, Emergent ( EBS) currently trades at ~1.7x with a ~44% discount to its 5-year average multiple, partly reflecting the waning benefit of the pandemic. The contract manufacturer reported over fivefold rise in net income in 2020 even as its ACAM2000 smallpox vaccine sales dropped ~17% YoY.
After another ~3% YoY decline in 2021, the company set its 2022 smallpox vaccine sales guidance at $190 - $210M compared to $206.5M sales in the prior year. The modest expectations suggest potential for an upward revision if monkeypox spreads in countries where the disease is not currently endemic.
While SIGA ( SIGA) has clearly outperformed over the past 12 months with a rise of about 87%, rivals Emergent ( EBS) and Chimerix ( CMRX) have lost more than 39% and 70%, further highlighting the extent of undervaluation subject to the future course of the outbreak. |
