Mpox Stocks Have Popped, But Pickings Are Slim For The Discerning Investor

Summary:

• WHO has declared a public health emergency due to an upsurge of mpox in Africa, leading to a coordinated international response.
• Biotech companies working on mpox solutions have seen substantial gains in share prices following the announcement.
• Companies like Bavarian Nordic and Emergent BioSolutions are leading the way in developing and distributing vaccines for mpox, with potential for value realisation.
• Multiple other microcap stocks have experienced surges in valuation, but the reality may be that, unlike during the pandemic era, fortunes cannot be won backing mpox stocks. The situation is barely comparable with the pandemic.

Investment Overview

Last week, on August 14, the World Health Organisation (“WHO”) declared a public health emergency in relation to an “upsurge of mpox in the Democratic Republic of the Congo (DRC) and a growing number of countries in Africa”.

WHO Director-General Dr Tedros Adhanom Ghebreyesus was quoted stating:

The emergence of a new clade of mpox, its rapid spread in eastern DRC, and the reporting of cases in several neighbouring countries are very worrying. On top of outbreaks of other mpox clades in DRC and other countries in Africa, it’s clear that a coordinated international response is needed to stop these outbreaks and save lives.

Professor Dimie Ogoina, Chair of the International Health Regulations (“IHR”) Committee that helped determine the ruling, was quoted as follows:

The current upsurge of mpox in parts of Africa, along with the spread of a new sexually transmissible strain of the monkeypox virus, is an emergency, not only for Africa, but for the entire globe. Mpox, originating in Africa, was neglected there, and later caused a global outbreak in 2022. It is time to act decisively to prevent history from repeating itself.

The previous outbreak in 2022 – also declared a public health emergency – was declared over in May 2023, and the strain identified – Clade II – was less severe than the latest strain identified, Clade Ib, which carries a much greater risk of death. Outside of Africa, a single case of Clade Ib mpox has been identified in Sweden, thus far.

The WHO says that it has now:

… triggered the process for Emergency Use Listing for mpox vaccines, which will accelerate vaccine access for lower-income countries which have not yet issued their own national regulatory approval. Emergency Use Listing also enables partners including Gavi and UNICEF to procure vaccines for distribution.

There are a number of listed biotech companies working on mpox vaccine solutions, antivirals, or diagnostics kits, and unsurprisingly, last week’s news, and the necessity to find effective solutions quickly, has triggered substantial gains in many of these companies share prices.

For example, at the time of writing:

• Emergent BioSolutions (NYSE:EBS) stock is up over 50% across the past 5 days. Current market cap is $542m.
• Bavarian Nordic (BVNRY) stock is up over 20% on a 5-day basis, and nearly 50% on a 1-month basis, giving the company a market cap valuation of $3.13bn.
• Co-Diagnostics (NASDAQ:CODX) shares are trading up over 30% on a 5-day basis with a market cap valuation of $48m.
• Tonix Pharmaceuticals (NASDAQ:TNXP) shares leaped in value last week from a price of $0.44, to a high of $0.73, although the gains have since been given back.
• GeoVax Labs (NASDAQ:GOVX) shares are up over 115%, giving the company a market cap valuation of ~$30m
• Applied DNA Sciences (NASDAQ:APDN) stock has risen in value by over 300% across the past 5 days, and its market cap has risen to $14.6m
• Virax Biolabs (NASDAQ:VRAX) shares are up over 190% on a 5-day basis, valuing the company at $9m

Searching For Value Among Mpox Rally – Caution Is Paramount

The first thing to note about market rallies triggered by outbreaks of disease is that they may not last long.

For example, in 2022, shortly after the health emergency was declared, Bavarian Nordic stock jumped from a price of ~$11 in May, to over $18 per share in August. By the time the emergency was declared over in May 2023, Bavarian Nordic’s stock was trading at ~$10 per share.

The second thing to note is that amongst the rallying stocks, there are many companies of such low market cap valuation that they must be considered amongst the most risky stocks to buy across any area of the stock market. Very small share purchases can send their valuations soaring, while small sales can have the opposite effect.

And a third problem is preparedness – are these companies genuinely capable of making a meaningful contribution to the emergency, through e.g. developing a vaccine, creating a diagnostics tool, assisting with manufacturing or distribution of a vaccine or antiviral?

Virax – Third-Party Test Kit Supplier, A Typical Example

Let’s begin by taking a closer look at Virax, a $9m market cap company which says it has the capability to distribute PCR tests for mpox, amongst other diseases.

In 2022, 36 cases of mpox were identified in the United Kingdom, with the U.S., Canada, Australia, Italy, Spain and Portugal also reporting cases. So far in 2024, cases of Clade 1b have been reported in Burundi, Kenya, Rwanda and Uganda in Africa, and outside of the continent, only in Sweden to date.

As such, the requirement for mass testing would appear to be highly unlikely, although it is worth noting that cases of mpox – any strain – have been identified in the US, China, Russia, Brazil, Australia, and much of Europe and Central America in 2024.

Virax is essentially a third-party delivery company reliant on larger partners for its tests, that scarcely generates any revenues, and has been flirting with delisting from the Nasdaq, completing a 1-10 reverse stock split in December last year in order to maintain compliance with Nasdaq listing laws (shares must trade above $1).

While it isn’t inconceivable that Virax diagnostics kits could be used, were mpox to begin to spread in a similar fashion to COVID in 2020, the chances of that happening are extremely remote, experts have warned, therefore buying stock at the current inflated price would be a hugely risky endeavour.

Tonix – Preclinical Vaccine Candidate In Bavarian Nordic’s Shadow

Tonix, meanwhile, is developing TNX-801 (recombinant horsepox virus), for preventing mpox, however its primary focus is on treating fibromyalgia (a Phase 3 study is underway) and TNX-801 has not yet even entered the clinic for in-human testing.

According to the United Nations website, several vaccines are already approved to treat mpox:

WHO recommends use of MVA-BN or LC16 vaccines, or the ACAM2000 vaccine when the others are not available.

MVA-BN, otherwise known as Jynneos, has been developed and is marketed and sold by Bavarian Nordic, based in Denmark. As mentioned, Bavarian Nordic shares have been rising, and the company has issued several press releases discussing Jynneos.

On August 13, Bavarian Nordic announced that the European Health Emergency Preparedness and Response Authority (“HERA”) had made an order for ~175k doses of Jynneos “for donation to the Africa Centres for Disease Control and Prevention (“CDC”) in support of their strengthened response to the mpox outbreak which is spreading across the African continent.”

In its press release, the company notes that “only two African countries have granted Emergency Use Authorization for the MVA-BN vaccine”, and also states that:

The order from HERA will have no impact on the company’s overall financial guidance for 2024.

Bavarian’s vaccine – approved in the US and Canada as Jynneos and IMVAMUNE respectively, and in the EU/EEA and UK as IMVANEX – was originally developed in collaboration with the U.S. government to ensure the supply of a smallpox vaccine for the entire population.

On August 16, in response to the mpox outbreak, Bavarian Nordic submitted data to the European Medicines Agency (EMA) to attempt to secure approval for use in adolescents. On August 17, the company discussed supply in a separate press release, noting that it:

… supplied more than 15 million doses of the mpox vaccine to more than 76 countries around the World during the mpox PHEIC in 2022/23

The company also noted that it:

… has informed the Africa CDC that it has the capacity to manufacture 10 million doses by the end of 2025, in addition to current orders, and could already supply up to 2 million doses this year.

The LC16 vaccine is produced by the private Japanese pharmaceuticals company KM Biologics Co, part of the candy maker Meiji Holdings Co.

Emergent BioSolutions – Credible Competitor To Bavarian?

Another company with a vaccine developed to treat smallpox that could be adapted to treat mpox is Emergent BioSolutions, a +$500m market cap company, albeit after a 300% share price run up year-to-date.

Emergent’s key product is NARCAN nasal spray, developed to help reduce opioid overdose deaths, while a smallpox and an anthrax antibody and vaccine also contribute to revenues, which were $255m in Q2 2024, with $120m of that figure driven by Narcan, and only $18m by the smallpox products.

In a press release yesterday, Emergent stated it has:

… pledged to donate 50,000 doses of its ACAM2000^®, (Smallpox (Vaccinia) Vaccine, Live), through Direct Relief, a humanitarian relief organization with a long history of providing vital medicines to the Democratic Republic of the Congo (DRC), as well as the other impacted countries of Burundi, Kenya, Rwanda, and Uganda

Emergent submitted a supplementary New Drug Application (“NDA”) to the FDA last year requesting authorisation to use ACAM2000 to treat mpox, and the company notes the “Africa CDC estimated they will need 10 million doses to control the epidemic in the continent”, meaning more doses of alternative vaccines will be required.

The WHO has invited manufacturers of mpox vaccines to submit an Expression of Interest for the WHO’s assessment as to whether their vaccine may be added as an Emergency Use Listing (“EUL”). At this stage, however, the CDC only recommends vaccination for those who suspect they may have had exposure to mpox, through sex with a partner who has subsequently been diagnosed with mpox.

Essentially, mpox is not as easily transmissible as COVID was, with prolonged contact – usually sexual activity – tending to cause spread of mpox, while COVID was spread via droplets in the air, making it extremely infectious. As such, and as has been stated by the regulatory health authorities, widespread vaccination against mpox remains a distant prospect.

Emergent Biosciences stock clearly seems to have spiked in recent weeks, but its stock is down over 20% in trading so far today (at the time of writing) therefore we may speculate the market is already beginning to refocus on Emergent’s somewhat turbulent day-to-day business operations.

The “Best Of The Rest” – Co-Diagnostics, Geovax, Applied DNA

For those still determined to find some value in companies with mpox capabilities, however obscure, GeoVax has “preclinical research and development programs” that “include preventive vaccines against mpox“, so we are back in Tonix territory – it is hard to imagine the requirement for new mpox vaccines to extend to a $30m valuation microcap not yet in the clinic.

Nevertheless, one bold analyst has set a price target of $22 for the company, whose shares presently trade at $5.80, after a triple-digit percentage run up in its valuation over the past week. GeoVax has announced this week that it will raise $8.5m via an at-the-market fundraising, perhaps taking advantage of an elevated share price, but has not made any communications around mpox, having six other preclinical infectious disease candidates in its pipeline, two cancer therapies in clinical studies, and a COVID vaccine in Phase 2b studies.

Meanwhile, Utah based Co-Diagnostics makes PCR tests for infectious diseases (amongst numerous other projects), although its latest quarterly report (Q2’24) 10Q submission makes no mention of mpox, and the company earned just $161k of product revenues last quarter, as it works towards securing 501K clearance for a COVID-19 test kit. The company has not yet issued any communication relating to the mpox emergency.

Finally, Applied DNA is another PCR test kit maker, and its latest quarterly report makes no mention of mpox, although its website currently carries the following statement:

Applied DNA Clinical Labs, LLC (“ADCL”) has the capability to offer Mpox testing under its Linea™ Mpox Virus 1.0 Assay, a New York State Department of Health-approved laboratory test. The Linea Mpox test is approved only for the detection of Mpox Clade II, which was in multi-country circulation in 2022 and early 2023, and which continues to circulate at low levels.

Intriguing, perhaps, but the fact the test cannot detect the more troublesome Clade Ib strain is problematic, and the possibility of mass testing for mpox seems remote, given it is easier to detect who may be at risk than who may be at risk for e.g. COVID, or other infectious diseases.

Concluding Thoughts – Plenty Of Speculation, But Few – If Any – Stocks Should Be Spiking On Mpox Concerns

Hopefully, this whistle-stop tour of stocks with potential upside related to their mpox treatment or detection qualities has provided a useful guide for readers.

Naturally, investor’s opinions around the latest mpox outbreak and its implications will differ, but some conclusions seem inescapable.

Mpox is an entirely different type of disease to COVID, that is nowhere near as infectious and tends to affect a certain group – men having sex with other men.

While the outbreak is serious and devastating – with ~450 deaths reported in the DRC, thanks to the more deadly strain, regulatory authorities are advising the outbreak may be contained and there is no requirement for mass testing, mass vaccination, lock down or any other COVID era phenomenon.

Few listed companies are in a position to make a meaningful difference to counterract the mpox outbreak, and those that are have issued statements. Arguably, the two companies that realise genuine value from helping treat the outbreak would be Bavarian Nordic or Emergent BioSolutions, although the evidence is beginning to suggest that initial share price spikes are already beginning to slide, and investors may generally be better off investing in these companies on the strength of their day-to-day business operations as opposed to their ability to realise unexpected revenues from mpox.

Essentially, the play on an outbreak such as mpox would be to act decisively and quickly on the earliest of news, and to be prepared to lose large sums of money if investing too late, and potentially even finding it hard to sell stock during a hype-induced rally.

While fortunes were rapidly made and lost during the pandemic era, the requirement for mass vaccinations was immediate and global, with COVID vaccines and antivirals ultimately earning hundreds of billions of dollars, justifying the hype around so many biotechs pivoting to COVID vaccine of antiviral development.

There seems almost no prospect of there being a repeat of such a prolonged period of uncertainty and speculation, but naturally, Wall Street will be monitoring the situation carefully and making speculative buys.

The reality may be that mpox offers few if any chances to realise a rapid gain that is not highly speculative and carries a risk of heavy losses, however, at least at the present time, based on an objective overview of the emergency at this time.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

---

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

---

If you like what you have just read and want to receive at least 4 exclusive stock tips every week focused on Pharma, Biotech and Healthcare, then join me at my marketplace channel, Haggerston BioHealth. Invest alongside the model portfolio or simply access the investment bank-grade financial models and research. I hope to see you there.