5 Ways to Invest in Testing, Vaccines and Clinical Trials

It's been all hands on deck as companies involved in medical diagnostics, testing and faster clinical drug trials have turned their focus to Covid-19. Several leading investment experts and contributors to MoneyShow.com highlight some favorite companies that have the potential to help in battling this pandemic. Timothy Lutts, Cabot Stock of the Week Quidel offers a number of rapid point-of-care tests for detection and diagnosis of many critical diseases and conditions, including influenza, respiratory syncytial virus, Strep A, herpes, pregnancy, thyroid disease and fecal occult blood, among others. With point-of-care testing, hospitals, urgent care centers and emergency rooms can see the test results within minutes instead of sending them out to a laboratory and that is boosting this firm's prospects during the current pandemic. The FDA just approved Emergency Use Authorization for Quidel's Lyra SARS-CoV-2 Assay -- which detects nucleic acid -- to include three additional thermocyclers (machines that amplify segments of DNA). As well, the authorization adds to the specimens from which testing can be done, now including nasal and nasal turbinate swabs. Historically, growth hasn't been fantastic here, but Quidel's revenue growth has been picking up steam, fourth-quarter results easily trounced estimates and there's no question demand for its new devices should be strong in the months ahead. Eddy Elfenbein Growth Stock Advisor I have no doubt we'll get through Covid-19. We are a resilient, innovative, and adaptable country. But, as with our experiences post-9/11, I also know the world is changing. And, with that change comes new challenges, and new opportunities. My #1 stock in the race to fight Covid-19 is a classic picks-and-shovel play called Simulations Plus , which makes software that lets drug companies simulate tests of their products in the virtual world before undergoing human or animal testing. This is a big cost saver for drug companies. Simulations Plus helps streamline the R&D process by making it faster and more efficient. Not only is this cost effective, but it also helps drug companies in dealing with time-consuming regulatory hurdles. In fact, there are times when the results from SLP's tests have allowed companies to waive clinical studies. This means drug companies don't have to deal with the time and expense of recruiting test subjects and analyzing test results. The cost savings are substantial. SLP's software can be a big help for any company racing to find a vaccine. The company recently established its StrategiesPlus Covid-19 ACT Program designed to speed consulting assistance to any organization involved in coronavirus research. By using Simulations Plus's software, drug companies can experiment with many variables like fine tuning dosage amounts. Companies can also see potential harmful side effects. Another important factor is that companies can identify treatments that aren't beneficial. In healthcare, cost control is a major issue. That's why Simulations Plus's products are in such heavy demand. Over the last six years, earnings per share have grown from 18 cents to 25 cents to 29 cents to 33 cents to 42 cents, and last year Simulations Plus made 48 cents per share. I think the company has a good shot of making close to 54 cents per share for this fiscal year. If that happens, that would mean Simulations Plus doubled its profits in four years, and with no debt. This is a great company and it may play a major role in defeating Covid-19. Doug Gerlach, SmallCap Informer As a contract research organization, Icon plc supports all stages of development for new drugs. Its customers include the pharmaceutical, biotechnology, and medical device industries. As nearly one-third of drug development research is outsourced, Icon helps pharmaceutical customers to control costs, shorten development times, and navigate more-complicated clinical trials. The company's track record is impressive, leading to approval of 18 of the world's 20 best-selling drugs. The company specializes in the strategic development, management, and analysis of programs that support various stages of the clinical development process from compound selection to Phase I-IV clinical studies. Icon was founded in 1990 and is headquartered in Dublin, Ireland. The company currently operates from 99 locations in 40 countries and has approximately 14,600 employees. Over the past decade, Icon has grown sales at an annualized rate of 13.1% a year, EPS growth has been less consistent, but have been growing at 39.6% a year since bottoming out in 2011. In the near term, increased efforts to find treatments and vaccines for the Covid-19 virus could result in some benefit to the company, though workplace restrictions affecting employees in its various facilities could affect productivity. The company does offer remote monitoring and testing tools as well as direct-to-patient contact solutions that could assist in global efforts. Within the healthcare industry, positive trends are identifiable for increased research and development spending, FDA approvals, funding for biotech research, and prescription drug sales worldwide. All of these underpin Icon's growth prospects. Over the next five years, analysts on the Wall Street see the company growing EPS at 11.9% a year. In January, Icon management guided towards revenue growth of 5.8%-10.0% for the year, and EPS growth of 9.7%-14.1%. We are pegging long-term EPS and revenue growth at 11%. Icon's stock is a buy up to $158. John Buckingham, The Prudent Speculator We buy only stocks we find to be undervalued along several lines relative to their own trading history, those of their peers or that of the market in general, notes John Buckingham, a leading value investing expert , money manager and editor of The Prudent Speculator. Our parget prices incorporate a range of fundamental risks (e.g. credit, customer and competitive dynamic) that we believe the companies may face over our normal three-to-five-year investing time horizon. Abbott Laboratories develops, manufactures and sells health care products and services with a portfolio of leading, science-based offerings in diagnostics, medical devices, nutritionals and branded generic pharmaceuticals. Shares have held up relatively well during the market selloff, and recently rallied after the company announced that the FDA had granted an emergency use authorization for its Covid-19 portable molecular test, which is capable of detecting the virus within 5 minutes. The test will run on the company's ID NOW platform, providing rapid results in a wide range of healthcare settings such as physicians' offices, urgent care clinics and hospital emergency departments (there are 18,000 ID NOW units currently placed). The Covid-19 tests will definitely give a boost to the firm's diagnostic business, but we would expect the overall segment to still be down as fewer other tests will be run during this time. The near term is anyone's guess, but in the long run, we believe that high-quality Abbott should be able to continue to enhance its free cash flow generation, especially as its continuous glucose monitoring system, the FreeStyle Libre, increases in popularity. One of the highest quality names in our universe, Johnson & Johnson is a leading global health care company, with a diversified portfolio of pharmaceutical, medical device, diagnostic and consumer health products. Several hurdles that include elevated competition, pricing pressures and struggles in the medical technology division, and opioid litigation have kept a lid on shares over the past couple of years. Johnson & Johnson also recently announced a leading vaccine candidate for the Covid-19 virus. The firm expects to initiate human clinical studies by September 2020 at the latest and anticipates the first batches of a Covid-19 vaccine could be available for emergency use authorization in early 2021, a substantially accelerated time frame in comparison to the typical vaccine development process. We believe the multi-year consolidation in shares offers investors a defensive, long-term growth opportunity at a very reasonable valuation. A broad revenue stream from its portfolio of stalwart products should also provide insulation from the economic downturn.

5 Ways to Invest in Testing, Vaccines and Clinical Trials

These companies have the potential to help in battling the Covid-19 pandemic.

Columnist Conversation

The S&P Futures for 'Turnaround Tuesday'

Monday Morning Fibocall for 9/20/2021

Interested in Uranium? Just Saying

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.