The healthcare sector was shaping up for a good year in 2024, with many family offices and other institutional investors favouring it as one of the few places in the equity market that looked like a sure bet to make money this year. Mpox seems to be changing the landscape here, leading to a rush of speculative cash hitting healthcare stocks, in a scenario reminiscent of the dark days of 2020.
Mpox is going to drive share prices in the sector higher than perhaps they should be, which investors need to be cautious about. But below are five stocks which were already looking like good bets even before last week’s buying frenzy.
TG Therapeutics NASDAQ:TGTX
Keep your eyes on TG Therapeutics, which I rate as one of the best quality healthcare stocks in the world right now. Its investors probably agree, having seen a return of 262% over five years and 87% in the last six months. In the last five days alone the stock has put on 16.5%. TG Therapeutics is a commercial stage biopharmaceutical company, with a market cap of USD 3.6bn. Its area of focus is B-cell mediated disease, where it is considered something of a world leader. Results out earlier this month reported USD 72.6mn net revenue for BRIUMVI, its flagship monoclonal antibody (used for the treatment of RMS in adults).
Abbisko Cayman [HKSE:2256]
Listed in Hong Kong, Abbisko Cayman is another clinical-stage biopharmaceutical company which engages in the discovery and development of small molecule oncology therapies in mainland China. It has a co-discovery collaboration agreement in place with Eli Lilly for the discovery, development and commercialisation of novel molecules. Its market cap is currently HKD 1.96bn (USD 251mn). Shares saw a boost back in November when investors piled into the stock, taking it up to HKD 4.26, but stock has slumped since to around the HKD 3.0 mark. Abbisko stock is still up 27% for the year. Return on equity and total revenues look good for a company of this size in the biotech sector. One red flag is the net debt the company is carrying.
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2Invest AG [FRA:2INV]
I’ve already rated 2Invest as one of the top small cap plays in Europe in a previous article. It is a German-listed investment company with a focus on the bioscience and IT sectors. Last month 2Invest said it was selling part of its shares in 4basebio as part of a subscription offer which saw heavyweights like Prudential and M&G Investment Management entering the 4basebio shareholder registry. This will make an earnings contribution of EUR 23.7m (before taxes) to the 2Invest bottom line. I last wrote up the company on 19 July when shares were trading at EUR 9.35. Stock has since moved to EUR 10.8 over August.
Covalon Technologies TSXV:COV
Another biotech stock on the move, Covalon Technologies is listed in Canada and develops products for infection management, advanced wound care and surgical procedures. I think it is fair to say Covalon is a beneficiary of current worries about the spread of mpox in Africa. Stock has moved from CAD 2.1 in May to trade at CAD 3.07 today. Shares are up a punchy 187% on a YTD basis. I don’t think this is a purely speculative play either: Covalon has reported revenue growth of over 16% in its last set of numbers, and we also saw a rise of 297% in EPS. The EBITDA margin is also up, as is free cash flow. Covalon is definitely worth a closer look.
Sumitomo Pharma Co [TSE:4506]
I’m finishing with a sector giant, Sumitomo Pharma Co, for those who don’t like dabbling in small caps. Shares in Sumitomo are on a hot run right now, up 29% in a week, which is probably unsustainable. Again, I suspect speculative money is positioning itself on the expectation that Sumitomo Pharma will become a player in the fight against mpox in Africa. But, mpox aside, Sumitomo Pharma stock is up 32% on the 12 month picture. If you got in a month ago, you would have seen a return of 55%. We may see some retracement on the share price if the mpox situation improves, but the fundamentals underpinning the stock look impressive, regardless of the mpox frenzy.
