There are different sorts of biotech stocks. Today's IBD 50 Stock To Watch pick, Emergent BioSolutions, has an ambit perfectly tailored to the global coronavirus pandemic.
The company focuses on preparedness and response products that address six categories: chemical, biological, radiological, nuclear and explosives; emerging infectious diseases; travel health; emerging health crises; acute/emergency care; and contract development and manufacturing, according to its 2019 10-K regulatory filing.
The Gaithersburg, Md.-based Emergent earns the bulk of its revenue from 10 FDA-approved products, including vaccines, therapeutics and drug-device combination products. It is labeled by many as a biodefense play, and for years has been the federal government's sole supplier of anthrax vaccine BioThrax.
In June, the Trump administration announced a $628 million Health & Human Services contract with Emergent to supply vaccines for the Strategic National Stockpile. That, according to the Washington Post, made the company the "highest-paid and most important contractor to the HHS office responsible for preparing for public health threats and maintaining the government's stockpile of emergency medical supplies."
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Emergent has since landed deals to manufacture coronavirus vaccines for Johnson & Johnson and AstraZeneca.
On Jan. 25, biotech stock peer Humanigen inked a deal to have Emergent manufacture Humanigen's lenzilumab Covid-19 treatment. The treatment was then in Phase 3 trials in hospitalized Covid-19 patients. Humanigen plans to file for Emergency Use Authorization with the Food and Drug Administration sometime in the current quarter.
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In addition, the National Institutes of Health on Wednesday gave positive feedback on an investigational nasal vaccine from Emergent targeting influenza viruses.
This is a lot of swag for a company whose annual revenue first topped $1 billion in 2019. On Jan. 11, the company guided its 2020 revenue to a midpoint of $1.55 billion, a 40% gain. Analyst consensus calls for earnings of $7.35 a share, a 153% advance. Emergent plans to report fourth-quarter and full-year results on Feb. 18.
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Stock price action? In 2020, the biotech stock rallied 158% to a high in August, before pulling back into its current consolidation. It ended the year with a 67.9% gain.
Emergent shares have now scaled back above critical levels of support and are working on their third straight monthly gain.
As is often the case, there are multiple ways to read the biotech stock's chart. On a daily chart, IBD MarketSmith analysis reads the pattern as a 125-day cup base that is 44% deep with a buy point at 137.71. That puts Emergent stock presently about 20% below the entry.
On a weekly chart, MarketSmith sees a cup-with-handle base with a 122.71 buy point. That handle isn't technically quite long enough to be valid. But aggressive investors may have navigated according to this entry. Shares on Thursday were in a buy range, about 2% above the buy point.
Find Alan R. Elliott on Twitter @IBD_Aelliott
