- There is a potential discovery of a cure/vaccine for Zika Virus
- There are a few companies looking for a solution namely Inovio Pharmaceuticals (INO), VBI Vaccines (VBI), Sanofi (SNY)
- The race for the Zika cure is on the way. Company(s) who could provide the solution may present an opportunity to boost revenues and as well as the chance to contain Zika.
1) WHAT IS ZIKA?
A few months ago experts said that it’s only a matter of time for Zika to reach our shores, and they were right. As of this writing we have about 331 cases in Singapore. Let’s look at a few facts about Zika:
- The first infection in human has been reported around the 1950s
- Transmitted by the Aedes mosquito, identical to dengue.
- One in five infections are symptomatic
- Generally mild and self-limiting illness. Although rare, serious neurological complications have been reported.
- There is no vaccine or specific anti-viral drugs.
The rest you can find here
2) THE OPPORTUNITY
It is alarming and intriguing as no vaccine/drug/cure is available, thus creating a possible opportunity for the investor.
Let’s look at some companies developing a cure/vaccine/drug for Zika.
- Inovio Pharmaceuticals Inc (INO)
- VBI Vaccines (VBIV)
- Sanofi (SNY)
Ok now that we know some of the companies, we subject them to some basic financial analysis. Below, is a quick comparison of the given companies based on the following: 1) Cashflow from Operations, 2) Earnings Per share, 3) Free Cash Flow, and 4) Net Income. Below are the brief definitions of the metrics used:
- Cash Flow from Operations – it is the money a company brings in from ongoing, regular business activities, such as manufacturing and selling goods or providing a service.
- Earnings Per Share (EPS) – is the portion of a company’s profit allocated to each outstanding share of common stock. Earningsper share serves as an indicator of a company’s profitability.
- Free Cash Flow (FCF) – is a measure of a company’s financial performance. FCF represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base. FCF is important because it allows a company to pursue opportunities that enhance shareholder value.
- Net Income (NI) – is a company’s total earnings(or profit); net income is calculated by taking revenues and subtracting the costs of doing business such as depreciation, interest, taxes and other expenses. This number appears on a company’s income statement and is an important measure of how profitable the company is over a period of time.
All in all, we are interested in a company that generates money consistently. Investors should focus more on understanding the business rather than spending time watching the up and down of the stock price. In the words of Warren Buffett “Price is what you pay, value is what you get.”
Looking at the data above, it is quite obvious that Sanofi has the better numbers; however we must understand that it is a large cap company versus Inovia and VBI Vaccines which are considered small cap. A successful vaccine may not really move the revenues of Sanofi but could in fact increase Inovia and VBI Vaccines dramatically.
These companies are at a different stage on the race for a Zika solution. It is reported that Inovia Pharmaceuticals (INO) has the lead for they have the first approval for human trials. The company is trading below $10 and a market capitalization of around $680 million. It is not currently generating positive cash flow.
VBI Vaccines (VBIV) on the other hand, has applied to develop a vaccine solution for Zika. At its early stage of development it could take until next year (2017) for human clinical trials. VBI is also trading below $10, and a market capitalization of $140 million, it is not generating positive cash flow.
And lastly we have Sanofi (SNY) the company has around $100 Billion Market capitalization and has positive cash flow. Priced at around $40 a share, they have developed an approved Vaccine for the prevention of Dengue Virus giving it an advantage because Zika is somewhat similar to Dengue.
Though Sanofi has the size and the cash to leverage a vaccine, Inovia could make a breakthrough for they lead the race, and who knows VBI Vaccines could snatch the lead. It will be a matter of time for a cure to be available.
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Research Analyst, Mind Kinesis Value Investing Academy
Disclaimer: Please note that all information stated in this article is just for education purpose only and should not be used as any form of recommendation or advice.