The stock crash of 2020 has produced a lot of losers.
But it’s also forged some winners.
One of the industries that is most likely to benefit from the COVID-19 outbreak and profit in the long-term is biotech.
Sure, they’re not always the most stable investments. Firms that risk it all on innovative new tech are a gamble. But biotech, healthcare, and pharma stocks are a solid choice during these uncertain times.
For one thing, disease ignores a recession . Even with the economy in hibernation to limit the spread of COVID-19, drug-makers and biotech firms are working hard on new treatments.
The biggest firms spend billions on R&D, with the six largest spending $31 billion in 2019 developing new drugs. When sales take a hit, companies slow down clinical trials, cutting research in the short term. That gives them some financial stability.
These stocks have proven resistant to the 2020 tumble and are sure to recover faster than other sectors.
Here are five stocks to watch in the biotech space:
##1 Amgen (NASDAQ: AMGN)
This is a premium stock, one of the best most successful biotech companies out there. Amgen accomplished what no one else could do: the company made it through the devastation of March 2020 with nary a scratch.
While the Dow Jones, NASDAQ and S&P 500 lost more than 10 percent, Amgen exited March with a modest gain. The company scored better than 81 percent of its competition according to Investors Observer.
And for Amgen, this is a repeat performance. In 2008, during the depths of the Great Recession, Amgen’s stock soared by more than 24 percent.
What’s the secret?
Well, the company has a deep bench of solid products and strong sellers. With more than three dozen products in its pipeline, including the revolutionary drug Kyprolis, as well as a strong balance sheet, Amgen has what it needs to keep growth strong in 2020, regardless of the broader economic situation.
Moreover, the company’s stock is a relative steal, with a valuation that is only 13x its future earnings and a PGE ratio of 0.6.
At a time when many companies have to curtail their activities, Amgen is ramping them up, thanks to its status as an essential service.
So, while some clinical trials have been postponed, much of Amgen’s research and development will continue.
##2 Champignon Brands (CN:SHRM;OTC:SHRMF)
The key to success in biotech is innovation.
Finding new approaches to old medical problems.
And one of the most persistent issues facing modern science is the issue of mental illness.
The other big pharma firms—Pfizer, Amgen, Johnson & Johnson—develop anti-depressants with big prices, tough side-effects, and middling results.
It’s a big market—$13 billion in 2018 and expected to reach $16 billion by 2025. More than 40 million Americans suffer from anxiety, while 16 million suffer from depression. But big pharma’s solutions don’t cut it—drugs improve symptoms in only 40 – 60 out of 100 patients, while placebo treatments show improvements in 20 out of 100.
But one little Canadian research firm, called Champignon Brands (CN:SHRM;OTC:SHRMF) is working on a bold new solution.
Champignon— “mushroom” in French—harnesses the power of compounds locked away in hallucinogenic mushrooms. And the company’s stock has risen 300 percent since its IPO, on the basis of its revolutionary research.
Champignon has assets in three distinct “special compounds.”
The first: ketamine. A powerful anesthetic, ketamine has been on the scene since the 1960s. But when taken in small, daily infusions— “micro-doses,” in the industry lingo—ketamine shows signs it can be immensely effective at reducing the symptoms of clinical depression.
After years of resistance, the FDA has approved research on the first ever ketamine drug, after successful clinical trials, and has put it on the Fast Track and Breakthrough Therapy pathway for possible use.
That’s good news for Champignon, which also hopes to market products based on two other compounds, MDMA and Psilocybin.
In 2020 Champignon acquired a company that held four patents in Psilocybin. In initial research, the substance has proven very effective at treating depression and addiction and may hold a promise similar to CBD or cannabis, as a general well-being treatment.
Research into psilocybin has ramped up in recent years. New clinical trials are underway at Johns Hopkins, NYU, Imperial College, UCLA, and the University of Zurich.
Once approved, the market for medicinal use of mushroom-based compounds could be immense, rivaling that of cannabis. The total functional mushroom market could reach $34 billion by 2024.
And the market could be huge. The WHO estimates that 450 million of the world’s population suffer from mental disorders of some kind. In the U.S., 3.5 percent of the population suffer from PTSD, a complex mental disorder particularly prevalent in the veteran community.
Champignon’s treatments could provide relief for people in need. Just think of cannabis. A few years ago, the drug was illegal, seen as a “gateway” to other narcotics, and strictly sold on the black market. Now, cannabis is a colossal industry worth $11 billion in recreational and medicinal sales, one that could reach $73 billion by 2027.
The movement towards decriminalizing these compounds is already underway in Colorado, California, and Canada.
Champignon could be on the forefront of a revolution in mental illness treatment. And this small company could become the next big thing in medicine. Investors should take note.
##3 Gilead Sciences (NASDAQ:GILD)
You’ve probably been reading a lot about Gilead, a major biotech firm. That’s because the company is working round-the-clock on a potential treatment for COVID-19.
The drug remdesivir has improved outcomes in about two-thirds of patients suffering from severe COVID-19 effects. The drug remains in the experimental stages, but progress has been rapid.
And that’s been reflected in Gilead’s stock price, which is up 15 percent since January.
The drug was developed in 2014 to fight the Ebola outbreak, but it’s proven to be effective at treating COVID-19 symptoms, as it acts to inhibit the same enzymes.
And this has made investors very excited about Gilead, a little-known drug developer which had produced disappointing results for years.
Now, a recent release suggests that patients seem to be responding to the treatment. This means, Gilead could reap the benefits, and emerge from 2020 as an all-start stock.
##4 Novartis (NYSE: NVS)
Another company working on a COVID-19 treatment is drug-maker Novartis, a Swiss company.
You’ve probably seen its name crop up in connection to chloroquine, a malaria treatment that the company believes might act as an effective treatment for COVID-19.
Some are pretty enthusiastic about the drug—particularly President Donald Trump, who has been encouraging people to try it.
Though evidence that the drug can treat COVID-19 is still pretty sparse, Novartis has seen a burst of interest. As it’s price took a hit in March, the company is currently selling at a discount of about 20 percent.
But the company has more going for it than the President’s favorite COVID treatment.
It’s partnered with TScan on a therapy for solid tumors, funding it to the tune of $30 million.
And the company has a legacy of success. In 2017, it topped the list of highest-earning pharma companies, at $49 billion.
At a discount and with a full pipeline of products, Novartis looks like the perfect stock to snap up during a downturn.
##5 CVS Health (NYSE: CVS)
You might think that CVS, the nation’s largest retail pharmacy, is going to suffer from the COVID-19 outbreak, which has been devastating to retail firms.
But CVS has a secret: it’s both a front-line pharmacy, AND a pharmacy benefits management company.
In 2018, CVS completed its acquisition of Aetna, a health insurance provider, a $69 billion bill that made CVS a major player in the health insurance and benefits management industry.
This has diversified CVS to the point that it can weather the retail storm of COVID-19.
In 2019, the company brought in a whopping $10.4 billion in free cash flow, reducing its debt burden from the Aetna purchase.
While it’s stock has taken a pummeling, falling from $76 to $52/share from January to mid-March, it hasn’t sunk to the depths many other firms have seen, and it’s strongly positioned for a rebound. CVS pharmacies are considered essential businesses and remain open across the United States.
And while investors will have to wait for big dividends, CVS is in a good position to pay out when the time is right. The company tapped only 25 percent of its free cash flow to pay out a 3.4 percent yield in 2019, which means there should be plenty of cash on hand once conditions improve.
So, this company is a steal to buy during a down-turn.
Other biotech companies worth watching:
Zymeworks Inc. (TSX:ZYME)
Zymeworks is a Vancouver-based biotech company specializing in the development of therapeutics for the treatment of inflammatory and autoimmune diseases. Zymeworks burst onto the scene in 2017 with the largest Canadian biotech IPO in over ten years.
Zymeworks had a solid 2018, as reported in their year-in-review, with key partnerships with the likes of Celgene, Daiichi Sankyo, and a new collaboration with BeiGene.
The company also completed public financing round, adding over $97 million to its already-strong balance sheet.
Trillium Therapeutics Inc. (TSX:TRIL)
Trillium is a specialized biotechnology company that takes a unique approach on the industry, harnessing insights from nature to develop novel immunotherapies to treat cancer. Trillium’s products tackle such diseases as lymphoma and myeloma and other blood cancers.
Trillium went public over 13 years ago, and has already garnered a name for itself in this industry. The Toronto giant is now one of the shining stars of Canada’s biotech scene.
Oncolytics Biotech Inc. (TSX:ONC)
Oncolytics Biotech is another Canadian biotech firm. The company got it start from a major series of discoveries based out of the University of Calgary and has grown significantly over the past two decades. Onoclytics’ primary product is REOLYSIN, a first-in-class, systemically administered, immuno-oncolytic virus created with the potential to act as a therapy for cancer patients.
THC Biomed International (CN:THC) THC Biomed operates as a licensed producer under Canada's Marihuana for Medical Purposes Regulations. It is also engaged in the research & development of the products and services to medical marijuana.
THC Biomed's recently announced a new THC-based beverage, aiming to appeal to a broader range of consumers. John Miller CEO explained, "THC has conducted extensive research on cannabis edibles and beverages and I have found our product to be exclusive in its category."
Though THC Biomed may be smaller than some of its more well-known competitors, it is just as ambitious. And it’s beginning to pay off. Earlier this month, the company made its first shipment of cannabis products to its Saskatchewan partner, and is rapidly expanding its holdings, with two new strata lot purchases, adding to its growing array of assets.
HEXO Corp. (TSX:HEXO) Hexo, previously Hydropothecary, is making some major moves in the cannabis industry. The company, which is engaged in the production, distribution and marketing of cannabis and cannabis products, has secured a huge deal with international beverage giant Molson Coors.
The joint venture signifies a new era in recreational marijuana, bringing two heavyweight industries together under one roof
HEXO’s CEO and co-founder Sebastien St-Louis, explained, “As two leading companies who share a track record of excellent practices, as well as respect for law and regulations, HEXO and Molson Coors Canada have established a relationship built on trust, and together we will develop responsible, high-quality cannabis-infused beverages for the consumable cannabis market in Canada.”
By. Amy Chang
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FORWARD-LOOKING STATEMENT. Statements in this communication which are not purely historical are forward-looking statements and include statements regarding beliefs, plans, intent, predictions or other statements of future tense. Forward looking statements in this article include: that the Canadian government will fully legalize and regulate psychedelic medicine this year; that the worldwide functional mushroom markets combined will be worth $34.3 billion in gross sales in 2024; that Champignon Brands Inc. (“Champignon”) can raise funds and acquire the firms listed that are involved in the mushroom and the Psychedelic medicine industries and access the expertise of Champignon’s acquisition targets’ management teams to create and market depression and anxiety treatments; that, if psychedelic medicine markets open up in other industrialized countries, the global psychedelic medicine market could expand exponentially; and that Champignon’s business will be profitable. Forward-looking information is based on the opinions and estimates of Champignon at the date the information is made, and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Forward looking statements involve known and unknown risks and uncertainties which may not prove to be accurate. Actual results and outcomes may differ materially from what is expressed or forecasted in these forward-looking statements. Matters that may affect the outcome of these forward looking statements include: that Psychedelic medicine may not be legalized on the timeline as expected or at all; that markets may not materialize as expected; that psychedelic medicine may not turn out to have as large a market as thought or be as lucrative as thought as a result of competition or other factors; that Champignon may not be able to close on its announced acquisitions because of regulatory approval requirements or other reasons; that the acquisitions do not provide the expected benefits, business or expertise expected; that Champignon may not be as able to diversify or scale up as thought because of potential lack of capital, lack of facilities, regulatory compliance requirements in the US or outside of the US or lack of suitable employees, partners or suppliers; none of Champignon’s treatments have passed clinical trials or received FDA or other health authorities’ approval; that Champignon may not be able to raise funds and develop better treatments than competitors in the psychedelic medicine industry; that foreign governments may not allow Champignon to operate in their countries; that actual operating performance of the facilities Champignon do not meet expectations; that competition quickly develops; that Champignon may not be able to retain key employees, partners and suppliers; costs may be higher than expected and profits therefore lower; competitors may capture most or all of the increased market demand; and other risks affecting the Company in particular and the psychedelic medicine industry generally, including without limitation risks related to most agricultural crops, including crop failure and medical developments, including without limitation failure of human trials or rejection by medical regulators. The forward-looking statements in this document are made as of the date hereof and the Company disclaims any intent or obligation to update such forward-looking statements except as required by applicable securities laws.
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