Glenmark Pharmaceuticals (XNSE: GLENMARK) COVID-19 drug, FabiFlu, is acting as a magnet to the eyes and wallets of investors. Considering India has 426,910 coronavirus cases and counting, it makes sense that many eyeballs are watching the Mumbai based biotech. Indian COVID-19 cases are forecasted to grow before they flatten. Thus, many investors are scratching their heads as to whether they should jump on the Glenmark train.
Table of contents 1. Why are investors rallying behind Glenmark? 2. Should you invest in Glenmark pharma?
Why is Glenmark Pharma up 35% today?
On the 20th June, Glenmark announced to investors that they received approval from the Drug Controller General of India (DCGI) to market their COVID-19 drug, favipiravir. The DCGI only gave Glenmark the green to administer favipiravir to mild-moderate COVID-19 patients. Restrictive market requirements mean people without a prescription cannot buy favipiravir, which Glenmark intends to sell under the name FlabiFlu. Nonetheless, 70-80% of COVID-19 patients are categorized as either mild or moderate. Ultimately, allowing Glenmark to treat most of the world. Also, China, Russia, and Japan are using favipiravir to treat COVID-19 patients. The general feedback from these respective countries is that the drug is efficacious. Further compounding the optimism surrounding Glenmark’s COVID-19 drug.
Investors instantly rallied behind Glenmark on the 18th and 19th, causing modest gains around 5-10%. However, the positive investor sentiment kicked up a gear today as Glenmark pharma jumped 35% in the opening hours. The monstrous gains reflect the DCGI giving Glenmark the nod of approval over the weekend. Overall, Glenmark’s regulatory breakthrough elevated the pharmaceutical to new heights in the medical and investor worlds.
Is Glenmark Pharma worth the investment?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
Short answer: Yes, but understand the risks of investing in COVID Biotechs first (opinion not advice)
India’s coronavirus cases are surging, new hotspots are emerging in rural communities, and the government is attempting to reopen the economy. India’s current economic and health situation is nightmarish. However, Glenmark’s COVID-19 drug serves as a beacon of hope. Thus, we should expect to see the government get favipiravir to patients in a swift manner. (opinion not advice) Because the early the intervention the higher the chance of survival. So what investment strategies could you employ?
Riding the wave
Riding the wave involves getting in off a price-sensitive announcement and getting out when the hype begins to fade. Glenmark Pharma receiving market approval is probably one of the biggest waves to ride. Hence, the 30% rise today, which is incredible for a stock priced around $400. However, looking forward possible price sensitive announcements to get in off include: promising feedback from the Indian government on the use of favipiravir, possible approval from another regulatory body e.g EMA or FDA, and any comparisons that show how FlabiFlu outperforms the global standard of care (opinion not advice). In saying that we could see the hype gap up higher in tomorrow’s trading. However, it seems unlikely. Lastly, investors must understand riding the Glenmark wave holds the most risk. Because you can purchase your shares at the top of the mountain, the share price plummets, instantly leaving you with a paper loss.
Riding the anticipation
Riding the anticipation involves investing in the lead up to an event put pulling out before the announcement. In the case of Glenmark, this would entail jumping in when the share price stabilises with the intention of riding the positive outlook for a 10-20% gain (opinion not advice). Getting out before the announcement mitigates the risks of being affected by negative news and usually swings the profit odds in your favour. (opinion not advice)
Another possible strategy would involve investing in Glenmark Pharma for the long-term. Considering the recent news long-term investors looking to cement a position would best to wait for a sell-off in the coming days. Glenmark is now on the global COVID-19 stage, meaning volume could be pleasing for the next few months. Ultimately reducing the risks for long-term investors as a small gain could appear from holding for a couple of months (opinion not advice). However, the phrase long-term is different for most investors. Long-term could be five years, one year, or even one month. Thus, if you decide to invest in Glenmark choose a strategy that best suits your investing needs.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Patrick McLoughlin, Senior Manager of YIG.