<p>Given the wild fluctuations in the markets, it has been a crapshoot for those who want to find profitable names during this coronavirus pandemic. That being said, the pharmaceutical sector, especially companies involved in mitigating the spread of Covid-19, has been very enthusiastic. One such company is AIM ImmunoTech (NYSEAMERICAN: AIM). After years of disappointing performance, the AIM share is apparently in the middle of a recovery.
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However, if you look at the company’s website, it is not immediately clear why the AIM stock has soared. ImmunoTech’s claim to fame is its flagship drug Ampligen. Doctors are designed to treat severely debilitated patients with chronic fatigue syndrome and have prescribed Ampligen to manage symptoms associated with various cancers. In fact, before this pandemic, industry insiders considered ImmunoTech to be largely an oncology game.
But coronavirus changed everything. In early March, Japan’s National Institute of Infectious Diseases began experimenting with Ampligen as a potential Covid-19 treatment. According to ImmunoTech CEO Thomas K. Equels, the drug offers “excellent antiviral activity.” As there is no approved treatment approved by the Food and Drug Administration for Covid-19, the potential of Ampligen has contributed to raising the AIM stock.
But with stocks up 262% year-on-year, potential buyers are wondering if the low-hanging fruit is not already gone. That’s a fair question. Prior to the outbreak, ImmunoTech consistently failed to attract gains. Also, when this pandemic fades – and it will fade – you are left with an underlying business that has not met expectations outside of a crisis.
I also have to wonder if there is a real market for Ampligen. Frankly, I think most people are looking for a coronavirus-specific drug, not something that involves cancer. But first, let’s address the immediate vulnerability: the time frame.
The goal is late on the stage
On Thursday, the United States reached an unwanted benchmark: it now leads all countries in confirmed cases of coronavirus. You know the statement by President Donald Trump that everything is under control? Yes, it did not age well.
But I do not blame anyone for this disappearing crisis. We have had confusion and indecision from all corners of the government. Even when it came to signing the historic $ 2 trillion package of stimulus, we had to endure Washington’s sharp attacks. If I speak honestly, certain actions and statements have embarrassed me as a (taxpayer) American citizen.
But despite the ugly headline numbers, when it comes to trends, we are actually going in the right direction. Don’t get me wrong – I’m not trying to minimize the over 17,000 new cases over a 24-hour period. What I am saying, however, is that the daily growth rate has decreased over time.
At the beginning of this month, it was not uncommon for the daily rate of change to hit or exceed 40%. During the five days between March 18 and March 22, the daily interest rate averaged 39.5%. But during the three days between March 24 and March 26, the average dropped significantly to 25%.
Of course, there is little comfort for hard-hit areas in New York. Nevertheless, it shows that the unsurpassed measures by several states to issue mandatory home orders have begun to slow the infection curve. Of course it is not near flat but we will get there.
And that means a risk for the AIM stock. While I appreciate the enormous efforts that ImmunoTech made, it is only too late for large developed countries. When approvals are issued, the most affected countries today should see their growth slow down.
Also keep in mind that Ampligen is an early solution, not a complete throat treatment.
ImmunoTech has an image problem
Putting aside the time issue is another challenge for ImmunoTech Ampligen’s core application. As I mentioned above, the drug is used to treat cancer-related symptoms. This is the case, I’m not sure if patients would be gung-ho to use it if they are not in dire straits. And if they were in such a desperate situation, they would not use Ampligen.
Again, this is an early solution. For those who are already suffering from severe Covid-19 symptoms, your best bet may be a drug from Gilead Sciences (NASDAQ: GILD) or another established company.
However, this is not to say that the AIM share is completely without merit. While we naturally focus on ourselves, other countries such as Ireland, Denmark and Malaysia have just begun their nightmare of coronavirus. So a potential approval for Ampligen can prove profitable.
In the end, however, I am skeptical of ImmunoTech’s long-term profitability. But if you want to play, it’s not completely irrational. Just make sure you have your finger on the “sell” button.
Josh Enomoto, a former senior business analyst at Sony Electronics, has helped broker larger contracts with Fortune Global 500 companies. In recent years, he has delivered unique, critical insights for the investment markets, as well as for various other industries, including law, construction management and healthcare. At the time of writing, he had no position in any of the above-mentioned securities.