5 stocks that might benefit from COVID-19

Financial journalist and commentator on 3AW and Sky Business
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Once the realisation broke through that the coronavirus (COVID-19) outbreak was a very big problem for the world, traders and investors would have started to think about stocks that might benefit.

For many, the obvious candidate would have been the nation’s biotech giant, CSL. But while CSL is one of the world’s largest flu vaccine makers, and provider of anti-viral drugs such as Tamiflu, it is not directly involved: CSL said in February that it was offering expertise and facilities in the fight against the virus.

CSL said that coronavirus is quite different to influenza virus, so it is not a core area of focus for CSL or Seqirus (the company’s influenza vaccine business. “However, we have investigated possible adjacencies in expertise, technologies and facilities that might be able to contribute to the global effort and are pleased to advise that we have partnered with the University of Queensland’s COVID-19 vaccine development program,” said CSL. “We will provide technical expertise as well as a donation of Seqirus’ proprietary adjuvant technology, MF59®, to their pre-clinical development program. Adjuvants are used in vaccines to create a stronger immune response and to speed vaccine production and output. Seqirus’ adjuvant technology has a long history of use and a strong safety profile in both seasonal and pandemic influenza vaccines: the University of Queensland will use the adjuvant to test the viral protein it is developing with their molecular clamp technology.”

The next thought was likely to have been Ansell (ANN): Australia’s protective equipment maker generates about 53% of revenue from healthcare protection, including medical gloves. Ansell has ramped up its production of Personal Protective Equipment (PPE), in China as well as around the world, and is shipping as much product into China as it can from around the world, fast-tracking its regulatory and import process in order to speed up supply, and working closely with the Chinese authorities to allocate protective clothing where it is needed most in China. But in its half-year report in February, Ansell squashed the case for it to be considered a coronavirus stock, saying it “expects the net financial effects on the company’s operations from the Coronavirus crisis to be minimal.”

So investors and traders were forced down the capitalisation ladder – but some interesting candidates soon emerged.

 

  1. Zoono Group (ZNO, $1.94)

Market capitalisation: $317 million

Anti-microbial specialist biotech Zoono was trading at 47 cents in January – but the stock has shot to $1.94, on the back of its Microbe Shield, a patented polymer that forms a barrier layer on surfaces – human, building or machine – when applied as a spray, foam or wipe. The Microbe Shield surface is positively charged and attracts pathogens, which are negatively charged; when living cells strike the surface they are ruptured. The product kills pathogens including bacteria, viruses, algae, fungi and mould, remaining effective for up to 30 days on surfaces, and 24 hours on hands. Zoono puts this technology into products such as hand sanitiser and surface spray used in hotel rooms, cars and trains.

The Microbe Shield Surface Sanitiser was successfully tested in 2014 against bovine coronavirus – a surrogate recognised by the World Health Organisation (WHO) for other members of the coronavirus family, including the MERS virus (CoV-MERS) – and that test results confirmed a 99.99% efficacy, in five minutes. In December 2019 Zoono reported that in laboratory tests the Microbe Shield was found to be extremely effective in counteracting the African Swine Fever Virus (ASF virus), which is “decimating pig populations globally, not only within China and Korea, but also in other parts of Asia and Europe.” ZNO said it had been conducting trials in pig pens in China, with “outstanding results.” But there was more to come from the link to China.

On 30 January, Zoono addressed Covid-19 for the first time, saying it was confident that it could be part of the solution to both coronavirus and other new virus threats; reiterating that the Zoono technology, particularly its longevity and killing methodology, delivers an ideal solution. Most importantly, Zoono said that the Z71 Microbe Shield Surface Sanitiser and GermFree24 Hand Sanitiser products had recently been sent to a German laboratory for testing against the latest Chinese strain of the coronavirus (Covid-19).

On February 28, Zoono announced the results of the laboratory testing it had sought; that the Microbe Shield was more than 99.99% effective against Covid-19. Zoono said this result “demonstrates the ability of the Zoono technology to be part of the solution to prevent and protect against the spread of the Covid-19 Virus.” Zoono’s product was tested on the “feline coronavirus”, a globally accepted surrogate that is safer to have in a standard lab environment and which has the same structure as Covid-19.

Zoono is shipping as much product to China as it can, having just announced a distribution agreement with China-focused ASX-listed health and nutritional products maker and distributor Eagle Health Holdings Limited (EHH), for distributing its products in China. Zoono is not yet a profit-maker, but that’s not worrying the traders buying its shares.

 

  1. Holista CollTech (HCT, 16 cents)

Market capitalisation: $38 million

At the start of the year, Perth-based Holista CollTech was an obscure maker of natural food ingredients and wellness products. But the company – formed from the merger of Malaysian company Holista Biotech and CollTech Australia – also had in its product portfolio an all-natural disinfectant spray NatShield Sanitizer, which it sold in Malaysia.

Developed by US firm Global Infections Control Consultants (GICC), NatShield Sanitizer contains an anti-microbial compound called Path-Away. In late January, Holista CollTech told the stock market that demand for NatShield Sanitizer – of which Holista is the exclusive distributor for the ASEAN (Association of South-East Asian Nations) region – had surged on the back of the Covid-19 outbreak.

The announcement noted that Path-Away contains an active substance that “weakens the cell walls of the virus, causing the infectious organisms to clump together, in the process killing themselves, almost instantly.” The announcement also said that the NatShield Sanitizer, which Holista makes in Malaysia, was “created to treat previously known coronaviruses,” and that Path-Away was approved for use by Malaysia’s Ministry of Health, with special reference to the H1N1 virus – another coronavirus, which led to more than 70 deaths in 2009.

In early February, the share price jumped by 5.4% when Hollista announced the accelerated development of the nasal balm version of the NatShield Sanitiser, which it expects to have ready for international markets by the third quarter of 2020, at the onset of the northern hemisphere winter); HCT then surged by almost 22% on 10 February when the company announced that rising orders from Australia and New Zealand meant that it was investigating Australian production.

Later in February, HCT announced that it would extend distribution of the NatShield Sanitiser to the United Kingdom and Europe, having commenced bottling in the Philippines; and that GICC had also developed a set of equipment and processes that helps deploy Path-Away into the air condition and ventilation systems of buildings such as airports, transportation hubs, hospitals, schools and factories, to destroy deadly pathogens present in such enclosed public spaces.

But on 25 February, HCT issued a retraction of some of its 2020 statements, on the grounds that they did not technically comply with the disclosure requirements of the ASX Biotech “Code of Best Practice.” The first statement retracted was one in which Holista said Path-Away “has proven to kill all previously tested corona-type viruses.” The second referred to Path-Away’s stated ability “to kill more than 170 pathogens, including viruses, bacteria, and fungi, with a specific mention of being able to kill AIDS, Mycobacterium tuberculosis, and H1N1.” The retraction announcement sank the share price by 28%.

But Holista did not retract any statements from the initial announcement that sparked the company’s sudden rise to fame – the one that explained how NatShield, with the active Path-Away ingredient, “weakens cell walls of a virus, making them clump together and kill themselves almost instantly”; and that NatShield Sanitizer “was created to treat previously known coronaviruses.” Nor was a statement in a January announcement from GICC President Dr Arthur Martin, purporting to confirm that Path-Away has been proven to kill other existing forms of coronavirus, retracted – despite being virtually identical to another statement that was retracted.

Nevertheless, Holista CollTech shares, at 16 cents, have doubled from where they started 2020.

 

  1. Uscom (UCM, 35.5 cents)

Market capitalisation: $53 million

FY20 dividend yield: no dividend

Medical device company Uscom has gone one level of magnitude better than Holista CollTech – its stock has tripled so far in 2020, to 36 cents. In fact, UCM had quadrupled at one stage in February, to 48 cents.

The attraction for UCM is its main product, the USCOM (Ultrasonic Cardiac Output Monitor) 1A, which is a non-invasive advanced monitor that shows doctors how a patient’s heart is functioning, using Doppler ultrasound to measures blood flow across the heart valves, and allows the doctors to quickly pick up issues such as heart failure, sepsis, hypertension and pre-eclampsia (hypertension in pregnancy). The USCOM 1A can be used in hospitals or remotely, with digital analysis software stored on central servers or in the cloud.

The USCOM 1A has form in the coronavirus stakes – it was originally fast-tracked for approval in China in 2004, because of its potential importance in the management of Severe Acute Respiratory Syndrome (SARS), an illness also caused by a coronavirus. Chinese hospitals use the device to simplify diagnosis, monitoring and management of infections in babies, children, pregnant women, adults and the elderly: in January Uscom was given a five-year extension of its regulatory certification from the China National Medical Products Administration, the third consecutive approval for the device.

On February 10, Uscom told the ASX that the China National Health Commission had released the new 5th Edition of the National Protocol for the Detection and Management of Coronavirus, and that these Protocols recommended haemodynamic monitoring of severe and critically severe cases of coronavirus – which is exactly what the USCOM 1A does. The announcement said there had been a “material increase” in USCOM 1A orders from China during the past five weeks, with some devices being specifically installed for the monitoring of hospital patients diagnosed with 2019-nCoV).

The shares jumped 52% on that news: although the Chinese government did not mention Uscom by name, it may as well have done.

Uscom asked for a trading halt, and brought out an announcement on 11 February, saying that orders of USCOM 1A for the first five weeks of 2020 were more than double those of the first two months of 2019 – 38, compared to 17 – and that this was before the Chinese government, and thus did not include potential orders generated in response to the new protocols released on 5 February.

In another update on 27 February, Uscom confirmed that it had been “specifically recommended by the Chinese Government Coronavirus Guidelines” – in terms of the device’s function – as well as by the international Sepsis Guidelines for Children, for treatment of serious infections. Uscom said that Covid-19 patients die from cardiovascular pulmonary failure, which its devices address. But the company also made the point that: “This is not a coronavirus story but a seasonal infection story that is ongoing; and an innovative Australian medical device company is at the centre of its successful treatment.

Uscom has two other devices in the global market: BP+, a central blood-pressure monitor, and Spirosonic, an ultrasonic spirometer for asthma and chronic obstructive pulmonary disease (COPD). Its product portfolio helps clinicians combat all seasonal infectious diseases: as Uscom stated in its February 27 update, its business is “not just about coronavirus, and not just about China.” But those are the factors that the market is most interested in at present.

It must be pointed out that Uscom has been listed since December 2003, and has been trading below 50 cents for 12 years. It is yet to make a profit.

 

 

  1. Biotron (BIT, 13 cents)

Market capitalisation: $91 million

Back in June 2019, Australian biotech Biotron presented at the BIO International Convention held in Philadelphia, USA. The presentation mentioned that the company’s development pipeline included screening its library of compounds for potential activity against a “pan-respiratory” range of indications, including “coronaviruses, rhinovirus, adenoviruses and respiratory syncytial virus (RSV).”

Fast-forward to February, and clearly, someone remembered – and put two and two together – that Biotron’s IP represented a possible treatment for Covid-19. Biotron shares doubled in price – from 8 cents to 16 cents – bringing a speeding ticket from the ASX.

Biotron has filed patents in the USA for its pipeline of intellectual property – an antiviral platform with new class of small molecules with broad range of activities and targets in the virus world. On February 6, Biotron told the ASX that it was evaluating several promising compounds for activity against coronavirus, including the new Covid-19 strain.

Biotron’s core expertise is the design and development of drugs that target virus-encoded proteins known as viroporins. The company’s scientists were the first to identify and publish data showing that the E-protein of the coronavirus is a viroporin, and a good target for antiviral drugs. Within its proprietary small-molecule compound library, Biotron has compounds with good activity against a range of coronaviruses, ranging from the human coronaviruses that cause mild, cold-like symptoms as well as the SARS coronavirus that was responsible for that outbreak, in 2003.

Importantly, several of its compounds show broad-spectrum activity against multiple strains of coronaviruses. The company says Biotron’s antiviral platform can target a broad range of viruses, and the current interest shows importance of the new class of compounds it is developing.

The results of the tests against COVID-19 have not yet been released – but BIT shares have moved from 5 cents to 13 cents so far this year.

 

  1. Aeris Environmental (AEI, 63 cents)

Market capitalisation: $135 million

Aeris makes a proprietary hospital-grade disinfectant Aeris Active, which it says contains a “dual-active biocide system” that provides a broad spectrum viricidal, bactericidal and fungicidal effectiveness, together with proprietary residual protection that claims to offer long-term protection of at-risk surfaces for up to seven days.

In January, Aeris noted in its December 2019 Quarterly Report that demand for its products in China had significantly increased as the country struggled with the virus outbreak. Aeris Active was originally approved for sale by the Chinese National Health Commission in March 2019, but the company has been ramping up production since the beginning of this year. Then, in February, Singapore’s National Environmental Agency (NEA) notified the company that Aeris Active had been added to a list of approved general products for the disinfection of the COVID-19 virus.

From 28 cents at the start of the year, AEI has moved to 63 cents. But – stop me if you’ve heard this before – Aeris Environmental is yet to make a profit.

 

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.

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