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2 biotech stocks helping the Covid-19 fight. Are these shares a good investment?

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Two biotech stocks making headlines recently are Oncimmune Holdings (LSE:ONC) and Genedrive (LSE:GDR). Both are helping in the fight against Covid-19 while also cornering specialist health markets.

Biotech stocks making waves

Oncimmune Holdings is a life sciences firm specialising in the early diagnosis of cancers. It hit the headlines today as the prestigious Cedars-Sinai healthcare group has chosen it to provide antibody profiling for Covid-19 samples. Cedars-Sinai is a high-profile hospital attended by the rich and famous, including many politicians and A-list celebrities. The Oncimmune Holdings share price rocketed over 15% on the news, settling back at around an 8% rise. 

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The UK government recently awarded Oncimmune with funding to develop an all-inclusive diagnostic tool for the coronavirus. This should also help in the ongoing research required to make an effective vaccine. Cedars-Sinai is expected to be the first academic partner to benefit from this UK-funded programme. This is because it’s contributing antigens to the cause. Our bodies naturally produce antibodies to fight antigens to eliminate them. The tool will simulate the process and help make accurate predictions of patient responses to the virus. 

Winning contracts

Oncimmune has a £129m market capitalization. Its earnings per share are negative, but it has a very low debt ratio of 6%. Last month Oncimmune also signed a collaboration with biotech company Genetech, a division of Swiss giant Roche. This contract involves profiling samples from Genetech’s rheumatology trials for signs of rheumatological diseases, including the autoimmune disease lupus. There’s no doubt biotech stocks are making waves as the pandemic rages on and scientists scramble for new and unique ways to deal with it. 

Meanwhile, biotech company Genedrive is another one involved in diagnostics. On 30 September, it announced it had received approval for its Covid-19 testing kit to be used in South Africa. Genedrive has a £72m market cap and specialises in creating diagnostic tools for infectious diseases, human genotyping, animal health, pathogen identification, and other applications. After a relatively uneventful start to the year, Genedrive’s shares shot up by 2,344% between March and May. It was very much riding the wave of speculation surrounding tech stocks involved in Covid-19 research. Since then, Genedrive’s share price has fallen back 40%.

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Is now a good time to buy?

I think Oncimmunce looks the better investment of these two biotech stocks, because its links to Cedars-Sinai and Roche give it added credibility, and its global presence throughout the developed world is also a boon. The early diagnosis of cancer is vital in achieving a positive outcome, which makes it a lucrative area to be involved in, aside from its pandemic play. However, as a micro-cap listed on AIM, it still remains a risky buy. I’d add it to a contrarian portfolio of well-diversified stocks.

Genedrive still looks too small to me and therefore a far riskier investment. It has a 141% debt ratio which makes it even more dicey, and it’s operating in regions that automatically carry additional risk. There’s no doubt it’s working in a highly speculative and exciting area of biotech. But molecular genome diagnostics require large amounts of time and money for research and development, with no guarantees of revolutionary breakthroughs.

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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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