Investing in Pharmaceuticals and the Chinese Coronavirus

A deadly coronavirus in central China has made the jump from animals to humans and threatens to spread throughout the world. Health authorities in China race to contain the infection as the virus has the ability to jump from human to human. It is already in Japan and Thailand and major US entry points are taking precautions by screening new arrivals for fever. For the investor, there are two issues involved. One is how badly the spreading virus could affect the economies of countries where it lands and the other is opportunities in the pharmaceutical sector as companies strive to find efficient screening and diagnostic tools as well as vaccines and anti-viral antibiotics.

What Is a Coronavirus?

The coronavirus is an infectious agent commonly found in animals. Strains of the virus that are sometimes found in humans cause “usually cause mild to moderate upper-respiratory tract illnesses, like the common cold” according to the CDC. But, “human coronaviruses can sometimes cause lower-respiratory tract illnesses, such as pneumonia or bronchitis. This is more common in people with cardiopulmonary disease, people with weakened immune systems, infants, and older adults.”

And, there are more aggressive strains such as MERS-CoV and SARS-CoV according to the CDC. “About 3 or 4 out of every 10 patients reported with MERS have died.” And the SARS virus that jumped from birds to humans was commonly fatal but no cases in humans have been reported since 2004.

The 2019-nCoV Strain of Coronavirus

This is the name of the new coronavirus strain that emerged in the 11 million-person city of Wuhan in East-Central China. It is of concern because the first cases seem to have been associated with a huge seafood and meat market and were probably animal to human transmissions. But, now there is strong evidence that human to human transmission has occurred as more than a dozen hospital staff came down with the disease after caring for an infected patient. Of the 200 confirmed cases in Wuhan, four patients have died. And, of the 169 persons still undergoing treatment, 35 are said to be in “serious condition.” As with previous human versions of this virus, older adults, infants, and people with weakened immune systems are at greater risk of serious complications and death.

What Is Being Done about the Chinese Coronavirus?

The first line of defense for this virus is to contain the disease and prevent its spread across the world. Thus organizations like the CDC are setting up screening at the main entry points into the USA for folks from China and especially from Wuhan. The CDC has developed an in-house test the works to identify the virus and is working to get testing materials to other national and international agencies.

There is no antibiotic for this disease and no vaccine at this time. Patients receive supportive care and attempts are made to keep the infection from spreading.

What Pharmaceutical Investments Benefits from the Chinese Coronavirus?

Stocks in several Chinese pharmaceutical companies went up on hopes that diagnostic and therapeutic products can be invented and sold. Is this a reasonable investment approach?

Pharmaceutical Companies Doing Coronavirus Vaccine Development

Johnson & Johnson announced recently collaboration aimed at a vaccine for preventing the MERS coronavirus.

Janssen Vaccines & Prevention B.V., part of the Janssen Pharmaceutical Companies of Johnson & Johnson, the Coalition for Epidemic Preparedness Innovations (CEPI) and The Jenner Institute at the University of Oxford, United Kingdom, are working together to not only enhance novel vaccine development against MERS-CoV, but are also striving towards developing advance novel vaccines against the Lassa and Nipah viruses.

From an investor’s point of view, is this a good reason to invest in Johnson & Johnson? Johnson & Johnson is a huge company and the potential profit from preventing a few hundred cases of MERS virus deaths a year is tiny in comparison to their total cash flow. However, the research required to develop such a vaccine will make the next coronavirus vaccine easier to develop. The company that eventually has the wherewithal to create on demand a vaccine for a disease like the new Chinese coronavirus will be a moneymaker in our interconnected world where a virus develops in one place and ends up infecting the whole world within a year. As such, investing in Johnson & Johnson or anyone else doing research for vaccines or treatment of such viruses is for the long term and the province of intrinsic stock analysis.

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