While the coronavirus outbreak has driven equity prices and even the overall market lower in general, few individual equities, especially in the biotech sector, are taking advantage of the situation to soar higher.
Just like with every other calamity, this crisis situation has opened a narrow window of opportunity for a few players in the market to leverage their innovation into significant business gains. One such business is Tonix Pharmaceuticals Holding Corporation (NASDAQ:TNXP). The small clinical-stage biopharmaceutical company’s main drug development program focuses on developing a long-term treatment for post-traumatic stress disorder (PTSD) with its TNX-102 SL (Tonmya) proprietary low-dose cyclobenzaprine sublingual tablet, which has been designed for bedtime administration. Furthermore, the company is also leveraging its research to adapt TNX-102 SL as a bedtime treatment for fibromyalgia and agitation in Alzheimer’s disease.
These developments towards alleviating the negative effects of PTSD, fibromyalgia and Alzheimer’s are certainly worthy causes and have the potential for robust returns on one’s investment. However, investors did not see these developments as sufficient enough to gain interest in the Tonix Pharmaceuticals stock. Quite to the contrary, the stock dropped dramatically after its initial public offering (IPO) and has experienced significant volatility after the company deemed an initial line of research unlikely to yield the desired results.
While the extreme volatility subsided by early 2017, the share price continued its steep decline and hit its all time low of $0.40 at the end of trading on February 25, 2020. However, an announcement that the company is teaming up with Southern Research to continue the development of a potential coronavirus vaccine sent Tonix Pharmaceuticals’ share price soaring over the past two days. During trading on Feb. 26, the share price more than doubled to close at $0.89. Additionally, the share price more than doubled again and reached $1.94 at the beginning of trading on Feb. 27. However, after the initial spike, the share price gave back approximately half of those early gains and has been trading around $1.50 as of noon on Feb. 27.
The main driver of the share prices current surge is the possible wide application of Tonix Pharmaceuticals’ new potential TNX-1800 vaccine. Based on Tonix’s proprietary horsepox vaccine platform, the live modified horsepox virus vaccine is intended for administration via injection to offer protection against COVID-19.
Furthermore, Tonix is developing is a modified serum from the same platform to potentially use as a potential smallpox and monkeypox vaccine for the U.S. Strategic National Stockpile. Tonix Pharmaceuticals believes that its proprietary vaccine platform can potentially serve as a vector for the development of vaccines against other infectious agents. To mitigate the disadvantages of its small size, it only has a market capitalization of $8 million, Tonix Pharmaceuticals’ new collaboration with Southern Research — an independent, 501(c)(3) nonprofit scientific research organization with more than 400 scientists and engineers who work in five research facilities across four states — should accelerate research and yield faster results.
It is crucial that investors understand the risks associated with very small biotech companies before making any investment decisions. All investments have a certain level of exposure to risk. Some investments are riskier than others. The pricing and potential upside of each equity reflects that risk level. If Tonix Pharmaceuticals succeeds in creating a viable coronavirus vaccine quickly, the share price could spike even higher. However, the slightest sign of problems or delays with the vaccine will also send the share price back to its all-time low level from the beginning of this week.
The potential spike due to the successful creation of a coronavirus vaccine could drive the share prices higher in the short-term. Additionally, the share price could experience longer growth if Tonix Pharmaceuticals can leverage and expand its new vaccine platform to deliver protection against other viral agents. However, uncertainty is too high at this point and only the most risk-inclined investors should even consider taking a long position in the Tonix Pharmaceuticals stock. Furthermore, even these investors should consider using a very small fraction of the funds from their portfolio that they are willing to lose.
Investors who are less risk-tolerant can still gain exposure to stocks that could leverage the current coronavirus crisis into at least moderate gains. While slightly down today, Moderna, Inc.’s (NASDAQ:MRNA) share price has risen by more than 45% since the beginning of the week after announcing that it has shipped a batch of its experimental COVID-19 vaccine to the National Institutes of Health for human trials. Another biotech company, Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), has gained more than 35% since trading began on Monday morning.
Even some of the larger pharmaceutical companies are offering robust gains. With a market capitalization of nearly $50 billion, Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) has gained more than 15% this week. Furthermore, with a $94 billion market capitalization, Gilead Sciences, Inc. (NASDAQ:GILD) advanced more than 10% over the last five days.
These pharmaceutical companies are just a few of the stocks who are currently delivering gains against a market pullback. Astute investors always seek opportunities to outperform even bull markets. Still, the best investments are those that can prevent losses and perhaps deliver small gains against bear markets. However, it bears repeating that investors must conduct detailed market and equity analysis to make sure any investment decisions align with their specific portfolio’s strategy, time horizon and risk tolerance.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.