Posted in: Market NewsOp-ed
Published:
March 20, 2020 7:16 PM UTC

Anti-Malaria Drug Linked to COVID-19 Cure Is a Bad Investment

Speculators are betting that chloroquine makers will benefit from suggestions that the anti-malaria drug is a possible coronavirus cure.

  • After Mylan announced it would resume producing chloroquine, shares rose dramatically.
  • Anecdotal evidence suggests the anti-malaria drug as a possible COVID-19 cure.
  • Shortages of chloroquine in the U.S. have been reported.

Shares of Mylan (NASDAQ:MYL) received a boost after the biotech firm announced that it would resume manufacturing hydroxychloroquine-sulfate tablets.

The anti-malaria drug has been touted as a possible cure for the novel coronavirus.

President Donald Trump has already hailed the drug as a possible treatment for COVID-19.

At a press conference Thursday, Trump said of the anti-malaria drug:

…it’s shown very encouraging, very, very encouraging early results.

Trump added that the drug could be a “game changer.”

Shares of MYL surged ahead of the opening bell on Friday.

Mylan stock. | Chart: Yahoo Finance

Investing in Mylan because of chloroquine is a bad idea

Buying the stock, or any other maker of chloroquine, in hopes of enjoying an upside related to the COVID-19 pandemic would be ill-advised.

For starters, the Food and Drug Administration (FDA) hasn’t approved the anti-malaria drug as a cure for the novel coronavirus disease. Instead, the regulator is urging caution.

FDA Commissioner Stephen Hahn said earlier this week about using chloroquine to treat COVID-19:

What’s also important is not to provide false hope. We may have the right drug, but it might not be in the appropriate dosage form right now, and it might do more harm than good.

Chloroquine is old news

Chloroquine has existed since 1934 when German scientists discovered it. The U.S. approved chloroquine in 1949.

It’s already sold in generic form and just about any willing biotech firm can manufacture it quickly.

To be sure, demand for the drug has increased significantly. There have been shortages of the druge since Mar. 9, according to the American Society of Health-System Pharmacists.

This has even led to price gouging of a fish tank cleaner containing chloroquine on eBay by nearly 5,000%.

The fish tank cleaner is not suitable for human consumption.

Source: Twitter

Besides malaria, hydroxychloroquine is used in treating lupus and rheumatoid arthritis. Mylan sells its hydroxychloroquine drug under the Planquenil label.

The market is about to be flooded

But resuming production for the drug isn’t likely to bring Mylan excessive profit margins. Already, pharmaceutical giants are offering chloroquine to the U.S. government at no cost.

German pharmaceutical giant Bayer AG donated three million chloroquine tablets on Thursday. Bayer sells the tablet under the label Resochin.

Source: Twitter

Israeli biotech giant Teva Pharmaceutical Industries Ltd (NYSE:TEVA) donated 10 million doses of its hydroxychloroquine drug early Friday too.

Source: Twitter

So even as the number of the novel coronavirus cases rises in the U.S., Mylan is unlikely to benefit substantially by resuming production of Planquenil.

If the anecdotal evidence available is true, Planquenil could save lives. But it is unlikely to improve Mylan’s prospects.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered trading advice from CCN.com.

This article was edited by Sam Bourgi.

Mark Emem @wetalkmarkets

I cover business and the stock market for CCN. Currently based out of Nairobi, Kenya. Feel free to get in touch with me. Email: wetalkmarkets[at]yahoo.com

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