If this biotechnology giant succeeds in the race to treat the Zika virus, its stock would hit the stratosphere. Here's the full story behind the biotech opportunity of the decade.
If you want to create a "perfect storm" of frenzied media coverage, combine a virus outbreak with news that it's sexually transmitted and capable of causing birth defects. That's what we have in the Zika virus, a global scourge for humankind but a boon for cable TV ratings.
That spells panic for millions of people but also opportunity for biotech investors.
One company appears to be in the lead to develop the first vaccine for the Zika virus: Sanofi (SNY) . Headquartered in Paris, Sanofi is a global pharmaceutical company with a market cap of $105 billion. About one-third of the company's revenue already derives from emerging markets, where a Zika vaccine would be targeted. The company also has developed vaccines for similar diseases.
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The Zika outbreak has reached pandemic levels and as yet can't be prevented or treated by drugs or vaccines. Evidence has emerged that Zika fever in pregnant women can cause abnormal brain development in the fetuses they're carrying.
Zika already affects 1.5 million people in Brazil and potentially millions more in the Americas and around the world. Sanofi has the proven scientific savvy, existing infrastructure and cash flow muscle to accelerate production of a vaccine.
Researchers in Sanofi's vaccine division, Sanofi Pasteur, are working on a Zika vaccine that would prevent both the infection and concurrent illness. Sanofi has a leg up over its competitors because it has alreadydeveloped and received approval for vaccines to address viruses from the Zika family, notably vaccines for yellow and dengue fever, as well as encephalopathy.
The World Health Organization has declared the Zika virus to be a global health emergency and says it's spreading "explosively." This is unfortunate and frightening, but the reality is that it could create significant demand for vaccines from the company that is first with a viable product.
Causing even greater alarm is news that the Zika virus can spread through sexual contact. Cases of sexual transmission of the virus have been reported in the U.S., which helps account for the media's obsession with the ailment.
A mosquito-borne illness, Zika generates similar clinical symptoms to dengue fever: rash, joint swelling, and headaches. Its link to brain damage in fetuses is causing widespread terror in several developing countries, where international travel advisories are in effect.
Brazil's role as host to the 2016 Olympics in Rio de Janeiro next August only exacerbates anxieties and creates the potential for contagion to developed countries.
As a flood of patent expirations continue to shake up the drug industry, the future biotech winners will be those with the strongest drug development pipelines and the most innovative treatments.
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Sanofi's stock also is a dividend stalwart, with 21 years of steady or rising dividends under its belt (the current dividend yield stands at a robust 4.1%). The 10-year earnings-per-share growth rate is 2.5%. With a trailing 12-month price-to-earnings ratio of 21, the stock's valuation is in line with the pharmaceutical industry's average P/E of about 20 and lower than the P/Es of major competitors Merck and Pfizer, at 32.44 and 23.86, respectively.
Sanofi shares are currently trading at about $39.50, but the median 12-month price target from analysts who cover the stock is $53, which suggests it can gain 34%. The highest price target is $58, implying a one-year gain of 47%. But if the company pulls off the creation of a Zika vaccine, the gains should be considerably higher.
We've found a small-cap biotech "rocket stock" that's about to take off. UCLA researchers are stunned by a Nobel Prize-winning cancer breakthrough that's proven in clinical trials to eliminate lethal forms of cancer with a single dose. One small company owns the patent to this life-saving treatment. Now trading at about $5 a share, the stock of this innovative company is projected to surge 2,700% on an imminent FDA announcement. To download the full report, click here.
By John Persinos
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