After the initial deadly volley from the novel coronavirus, the broader healthcare industry’s attention shifted from developing treatments to researching and developing vaccines. Not surprisingly, several high-profile Covid-19 vaccine developers saw their market valuation skyrocket. But lately, this sector encountered disappointments, bringing attention back toward the treatment space. One particular biotechnology firm, InflaRx (NASDAQ:IFRX), could play a significant role as we head further along in the new normal.
First, some background information. At the end of September, Moderna (NASDAQ:MRNA) made headlines when the company’s CEO announced its coronavirus vaccine “won’t be ready for widespread public distribution until spring of next year,” according to a report from CBS News. Also, Moderna will not be seeking emergency authorization for frontline medical workers until Nov. 25 at the earliest.
It’s not the only company that disappointed the Trump administration, which had been touting a vaccine breakthrough. Not well known before the pandemic, Inovio Pharmaceuticals (NASDAQ:INO) was one of the first biotechs to propose a vaccine candidate for the novel coronavirus. But in late September and near the time when Moderna made its announcement, Reuters revealed that the Food and Drug Administration temporarily halted Inovio’s plans for late-stage clinical trials due to questions regulators had about the DNA-based vaccine and its method of delivery.
But the whammy was President Trump’s Covid-19 illness. Though details about how Trump got infected with the coronavirus are murky, the takeaway is that the world’s most protected person could not be spared the ravages of this virus. And when he was finally taken to Walter Reed Medical Center, President Trump was given two experimental therapeutics:
- Regeneron Pharmaceuticals’ (NASDAQ:REGN) REGN-COV2 antibody cocktail, which is a combination of two monoclonal antibodies, REGN10933 and REGN10987.
- Gilead Sciences’ (NASDAQ:GILD) remdesivir, a viral inhibitor.
Apparently, both therapeutics did their job. As well, because REGN-COV2 and remdesivir approach Covid-19 suppression in different manners, they appear to have played complementary roles to each other as opposed to competing roles. Obviously, with the President being the most valuable patient in the world, his medical staff had to go with the science that was most compelling.
In my view, this is incredibly positive for both REGN and GILD shares, as long as Covid-19 is a reality for us. Keep in mind that Trump’s medical team could have elected other therapeutics, such as LY-CoV555 manufactured by Eli Lilly(NYSE:LLY). LY-CoV555 is a neutralizing antibody targeting SARS-CoV-2, which is undergoing Phase 3 trials.
Though I don’t want to read too much into it, I believe it’s significant that Trump’s medical team went with REGN-COV2 and remdesivir.
Core Background into the President’s Antibody Therapeutics
If you’re looking at these evolving headlines from the lens of an investor, REGN and GILD will appear as stocks to put on your watch list. Because the U.S. has had so much trouble containing the coronavirus, there’s enough justification to support a bullish position.
However, both of these organizations are well-established blue chips, sporting multi-billion-dollar market capitalizations. Furthermore, these giants have several key drug pipelines under their belt. Yes, a Covid breakthrough would be helpful in terms of shareholder profits. Still, you’re probably not going to get rich off these names.
Interestingly, in various press events, President Trump has touted Regeneron’s antibody cocktail as a miracle drug. Now, I’m not one to hang on POTUS’ every word. Nevertheless, it’s possible that REGN-COV2 may be doing more of the legwork.
According to Stanford Medicine, the SARS-CoV-2 genome, unlike our human genome, is comprised exclusively of RNA. Therefore, for the coronavirus to replicate itself means making copies of RNA from RNA. Unfortunately, SARS-CoV-2 carries a gene-coding mechanism that catalyzes this replication quite effectively, as we have seen.
Where remdesivir comes into play, though, is that it inserts itself into the replication process, essentially scrambling the process so badly that copies of SARS-CoV-2 are rendered mute, if they are even distributed at all; hence, remdesivir inhibits the coronavirus.
Still, Stanford Medicine notes that “But while remdesivir is pretty good — better than many other antivirals, anyway — at faking out the viral polymerase’s companion proofreader protein, it’s far from perfect.”
“Some intact viral-genome copies may still manage to get made, escape from the cell, and infect other cells — mission accomplished.
Using remdesivir in combination with some still-sought, as-yet-undiscovered drug that could block the proofreader could turn out to be a more surefire strategy than remdesivir alone.” (emphasis mine)
Bingo! In all likelihood, REGN-COV2, which directly binds to the SARS-CoV-2 spike protein rather than suppressing its replication, may well be more effective than remdesivir. It also explains why Trump’s medical stuff utilized two different therapeutics: REGN-COV2 to kill the coronavirus and remdesivir to suppress any additional copies of the virus.
Where InflaRx Comes into the Picture
Naturally, Regeneron should garner more attention as the weeks go by. However, for growth investors, REGN stock has limited appeal. Again, as an established blue-chip name, its upside potential is limited due to the law of large numbers. But that doesn’t affect InflaRx and IFRX stock, which sports a market cap of less than $127 million at time of writing.
More importantly, the underlying antibody therapeutic, IFX-1, features core components that are similar to the allegedly effective (though experimental) REGN-COV2 monoclonal antibody cocktail. According to InflaRx’s website:
IFX-1 is a first-in-class monoclonal anti-human complement factor C5a antibody, which highly and effectively blocks the biological activity of C5a and demonstrates high selectivity towards its target in human blood. Thus, IFX-1 leaves the formation of the membrane attack complex (C5b-9) intact as an important defense mechanism, which is not the case for molecules blocking the cleavage of C5. IFX-1 has been demonstrated to control the inflammatory response driven tissue and organ damage by specifically blocking C5a as a key “amplifier” of this response in pre-clinical studies. IFX-1 is believed to be the first monoclonal anti-C5a antibody introduced into clinical development. Approximately 300 people have been treated with IFX-1 in clinical trials, and the antibody has been shown to be well tolerated. IFX-1 is currently being developed for various indications, including Hidradenitis Suppurativa, ANCA-associated vasculitis, Pyoderma Gangraenosum and COVID-19 pneumonia.
The primary selling point for IFX-1 is its high selectivity, facilitating positive health outcomes but without compromising the patient. According to an IFX-1 phase 2 clinical study posted on The Lancet, “The safety and tolerability analysis of this phase 2 part of the study did not result in any signals of concern. We believe that the totality of observed safety and preliminary efficacy signals support continuation to the phase 3 part.”
Moreover, another factor that could help IFRX stock is production capacity should IFX-1 be proven effective. According to Genengnews.com, “Regeneron executives have anticipated being able to produce up to 250,000 doses per month next year, through an increase in manufacturing capacity enabled under a partnership with Roche announced in August, and whose value has not been disclosed.”
Therefore, even if Regeneron’s antibody cocktail is given the green light by the FDA, if IFX-1 can be proven just as effective (or within a reasonable range), that would be a huge benefit to InflaRx due to the two therapeutics’ additive potential. Logically, this should be a tremendous catalyst for IFRX stock.
The Technical Argument for IFRX Stock
Before you dive into InflaRx, you must know that this is an extremely speculative bet. Earlier this year, IFRX stock was trading at just under $9 at its peak. Today (or more precisely at time of writing), shares are trading hands at less than $5.
So, this isn’t something that you would build a retirement fund off of. However, for a small-cap growth play, the immediate risk-reward profile is very intriguing.
Primarily, I say this because IFRX stock has become a “rational” investment since the beginning of July. As we explained, InflaRx offers a Covid-19 antibody therapeutic. Therefore, you would expect its shares to have a direct correlation with Covid-19 cases.
But the opposite dynamic occurred between the start of April through the end of June. Comparing new daily coronavirus cases (as recorded by the Centers for Disease Control and Prevention) with IFRX stock, the correlation coefficient was -66%. In other words, as Covid cases declined, IFRX shares increased in value.
Well, that doesn’t make much sense. Sure enough, during this period of insanity, IFRX soared to its year-to-date peak and tumbled down quickly afterward. But from the beginning of July until Oct. 6, IFRX shares a positive 66% correlation coefficient with new coronavirus cases.
The mathematical narrative has now flipped to a rational profile. Now, as coronavirus cases increase, so too does IFRX stock. Presumably, if cases continue to increase or God forbid we have a second wave, it’s possible given current trends that IFRX will pick up.
However, the risk is that coronavirus cases could decline as more people start to take the coronavirus pandemic seriously. If they do, the narrative for Covid treatments would probably decline. Still, social trends may not change overnight, leading to the potential for more outbreaks. As a near-term gamble, IFRX has a mixture of scientific credibility and encouraging technical price action to warrant a wager.
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