A More Sustainable Business Model Doesn’t Make iBio Stock Less Risky

I have never had a high opinion of iBio (NYSEAMERICAN:IBIO) due to a number of reasons, mostly fundamental. I will reiterate iBio Stock is more for day trading and does not offer long-term value. But that’s not to say that everything is doom and gloom. Some positive developments make me believe we finally have a chance for a long-term growth story.

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A commercial Covid-19 vaccine still seems like a pipedream. However, as Charles Sizemore points out, apart from working on a vaccine, the biotech company handles mass production of therapeutics developed by others. That is the long-term play here.

Meanwhile, there are other positive developments to note, as well. Chicago-based investment group, Lincoln Park Capital, has injected $50 million into the company, and IBIO stock is now on the Russell 2000 and Russell 3000 indexes.

That’s a lot of great news to unpack in a short space of time, but the question remains; is this bull run sustainable. In my opinion, the answer to that question remains no.

Massive Returns but for How Long?

You would be hard-pressed to find a bull run like the one IBIO stock is on at the moment. Through the peaks and valleys, shares are still up more than 1,650% year-to-date. That is unsurprising since several investors don’t want to miss out on any Covid-19 action. Unfortunately, that is pushing certain stocks to unprecedented heights.

Granted, many analysts, including yours truly, could be eating humble pie if IBIO-200, the company’s second Covid-19 vaccine program, ends up becoming a success.

If that is the case, the biotech firm will rake in the billions and laugh all the way to the bank. However, it’s a big if, since the company doesn’t have a history of developing commercially successful vaccines.

Lincoln Park Takes a Bet on IBIO Stock

In March, Lincoln Park Capital poured $50 million in capital to fund iBio’s operations. This was an important lifeline that the company needed to stay afloat. The latest quarterly results were bad, and the company is burning through cash at a high rate.

The investment firm is no slouch, its been in business for more than 100 years. Although many would consider the capital injection a gamble, but consider the possibilities. If iBio has a eureka moment, then the $50 million would seem like peanuts compared to the profits.

But let’s look at the flip side. The company does not manage to deliver a vaccine. Disappointing bulls driving shares upward retreat. Even then, other offerings can shore up IBIO stock value moving forward.

The company is actively working on programs to increase the speed of clinical trials. If successful, vaccines can be brought to the market at a quicker pace saving billions in costs. That will be a sustained tailwind for revenues moving forward and a more robust source of long-term growth.

Final Word on IBIO Stock

Biotech firms are enjoying a Cinderella run at the markets. Covid-19 has ripped the playbook apart for investing, with people forging fundamentals in favor of a gut feel. iBio has consistently produced lackluster quarterly numbers, and there’s nothing to suggest from its history that it could come up with a vaccine to end this crisis.

Still, even an investment firm, as established as Lincoln Capital, is making a play for the company’s stock. It remains to be seen if iBIO can deliver the goods and whether we will see the latter taking a more active role in the company’s management. If that were the case, then I am sure it will instill much-needed discipline to the company’s operations, which is always a good thing.

Ultimately, the decision to pour capital in IBIO stock depends on what kind of investor you are. If you like day trading and keep a close eye on the headlines, you stand you make some dough on your investment. Every bit of news one way or the other will lead to massive swings in share value.

If you can stomach that, then, by all means, go ahead and play. If not, there are plenty of safe investments that you can get your hands on, especially in the tech space. And if you want to invest in something far more stable in pharmaceuticals, than I would suggest going for Pfizer (NYSE:PFE) or Johnson & Johnson (NYSE:JNJ). Both companies are in the race to develop a vaccine. But more importantly, they have a history of stable long-term returns.