An outbreak of monkeypox may increase the stakes of these companies

(Bloomberg) — As health authorities around the world search for ways to stem an outbreak of monkeypox, investors are snapping up stocks of companies that could benefit from the race to eradicate the disease.

Vaccine producers, antiviral drug makers and protective equipment makers are in demand as investors capitalize on a strategy that has made gains during the coronavirus pandemic. Bavarian Nordic A/S biotech company and pharmaceutical company Siga Technologies Inc. Among the stocks in focus as well as the medical instrument supplier is Precision System Science Co.

Although the spread of monkeypox infection in more than 70 countries in a few months was nowhere as severe as the Covid-19 outbreak, it prompted the World Health Organization to declare it a global emergency. This statement may give the trade additional winds.

“Right now, the world depends on one manufacturer, Bavaria Nordic, for the monkeypox vaccine,” said Manish Bhargava, a fund manager at Straits Investment Holdings Pte in Singapore. To keep up with demand, we can expect other biotech companies to ramp up research and production. It is starting to be reflected in the strong share price performance of the sector.”

Here are some of the sectors and companies that have been active:

Vaccines and antiviral drugs

Shares of the northern Bavaria company more than tripled from a low in May after governments began ordering the Danish company’s monkeypox vaccine – the only vaccine specifically approved to stave off infection. The company raised its revenue guidance several times this year.

Analysts note, with Citigroup Inc. by increasing its target price for the company’s stock by 20% and indicating that there may be more upside if more orders arrive.

Shares of other companies that make monkeypox vaccines or antivirals have also caught the attention of US retailers. The stock of Siga Technologies, which makes a treatment called Tpoxx, has doubled this year. The treatment is approved to treat smallpox in the United States, and monkeypox and other viruses in the European Union and the United Kingdom.

Chimerix Inc’s Tembexa is a countermeasure used to treat smallpox, and the company said in May that it would sell the drug to Emergent BioSolutions Inc. Vaccine-wise, Emergent’s ACAM2000 is a smallpox vaccine that can be used in some cases against monkeypox.

Siga, Chimerix and Emergent are “principal beneficiaries” of the World Health Organization’s declaration that the monkeypox outbreak is a global emergency, according to Cowen analyst Boris Becker.

“With increased resources devoted to contact tracing and testing in the EU and the US, we expect the number of cases to rise significantly over the next few months, which could lead to further purchase of countermeasures,” Becker wrote in a note.

Japan has also begun to study smallpox vaccines as a way to prevent the spread of outbreaks, and this may spark interest in Meiji Holdings, whose unit KM Biologics produces the smallpox vaccine. Meiji Holdings stock has jumped 12% from its June low.

Citigroup analyst Hidemaru Yamaguchi wrote in a note that the Asian nation has a stockpile of smallpox vaccines but the quantity has not been disclosed while preparations are progressing to administer Tpoxx.

Virus detection

The focus is also on companies that provide virus testing kits and tools.

In Japan, shares of Precision System, which makes medical testing equipment, have doubled since late June. The Swiss company Roche said in May it had developed three test kits to help scientists track monkeypox.

More than 30 companies in China have obtained European Union certification for their monkeypox detection products, Jefferies Financial Group Inc analysts write. Including Christopher Lowe in a July 25 memo. These companies include early adopters such as Autobio Diagnostics Co. and Shanghai ZJ Bio-Tech Co. and Daan Gene Co. Shanghai ZJ is up nearly 40% in July.

Other potential beneficiaries are makers of antigen and antibody test kits such as Zhejiang Orient Gene Biotech Co., Ltd. and Assure Tech (Hangzhou) Co., Ltd.

© Bloomberg LP 2022

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