Adagio Therapuetics Inc (NASDAQ: ADGI) is up 23% premarket this morning on reports that its monoclonal antibody treatment for covid is effective on omicron. It’s possible to take either of entirely contrary views upon this news and as a result, we might expect Adagio’s stock price to remain volatile.
As background Adagio had a fairly terrible IPO back last year. OK, so the stock doubled soon after joining NASDAQ but it’s been a bumpy ride (including a halving and doubling again) down to a near 75% loss on the IPO price since then. Given that Adagio Therapeutics is working on the treatment of the current pandemic we might have expected better than this. Or, of course, the hopes were too high at that moment of the IPO.
These past few weeks have been dominated by news over omicron. Monoclonal antibodies are one of the very few shown to be effective treatments for covid itself. Sure, the vaccines were good and all that, but treating people who get covid anyways is an important part of the medical armoury. We’ve seen that mutations in covid can cause all sorts of problems. About vaccines, where boosters and new variants are required, through testing companies finding their tests aren’t all that accurate with omicron and so on. This is true of monoclonal antibodies too.
So, when Jefferies, on December 22, cast doubt upon Adagio’s monoclonal treatment being effective against omicron the stock dropped 15% in a day. On the other hand when another Jefferies analyst indicated on Dec 16th that it would be effective then the Adagio stock jumped 63%. We can see that the Adagio stock price is really being driven, in this very short term, by data and opinions on how effective the treatment is for omicron.
Note that it’s not about monoclonal antibodies for covid more generally, that’s proven. It’s about the specific Adagio variant working on the specific covid variant, omicron.
So, we can likely expect continued volatility in the Adagio stock price as more information comes out about the effectiveness of the treatment on omicron. Which is exactly what is happening, Adagio releases more information showing stronger effectiveness against omicron and the stock jumps this 23%.
We might assume that strong data, either way, will move Adagio strongly in that direction. Proof that it does not work on omicron will crater the stock, proof that it does make it soar.
It is though also possible to take another view. Which is that Adagio is still in Phase II/ III testing here. Sure, the FDA is fast-tracking covid treatments and all that. But there are other folks already out in the market with monoclonal treatments. It’s possible for Adagio to entirely miss the window because of the length of the testing process. Or even that give it another month and there will be another and different variant so the whole process has to be gone over again – does it work on this new variant?
In the short term, it’s likely that Adagio will bounce around depending upon news about omicron effectiveness. In the longer term, the stock price will be determined by something more basic – what’s the size of the addressable market when the treatment actually comes to market?
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Tim Worstall is a freelance writer specialising in economics and the financial markets.