The coronavirus story is unfolding with such force that most market participants have been completely blindsided. The crash has hit almost everything, with very few ports in the storm. Among those very few ports, one stock stands out to us as particularly interesting because the company is coming at the COVID-19 outbreak from a unique direction that deserves consideration.

Innovation Pharmaceuticals Inc (OTCMKTS:IPIX) is paving the way with a class of compound called Brilacidin, the company’s lead defensin-mimetic drug candidate, and now a new potential novel coronavirus (COVID-19) vaccine candidate.

The market has been sniffing some of this out, moving IPIX shares to the upside over the past two months even as the rest of the market falls apart. IPIX is up as much as 200% so far in 2020. But, clearly, any sense that Brilacidin might represent a possible vaccine candidate for COVID-19 could have far-reaching implications for the stock. 

The Story Expands

In that vein, the company’s most recent press release adds some interesting color to the story: Innovation Pharmaceuticals just announced further details on the Material Transfer Agreement (MTA) signed with a leading public health-focused U.S. university and top coronavirus expert. 

According to the release, “under the terms of the confidential agreement, virologists plan to evaluate the potential antiviral properties of Brilacidin, the Company’s lead defensin-mimetic drug candidate, toward developing Brilacidin as a potential novel coronavirus (COVID-19) vaccine.”

In other words, a “leading public health-focused U.S. university and top coronavirus expert” is involved in an agreement that provides for virology experts to take a closer look at the company’s key compound as a possible vaccine for COVID-19.

The release continues on to make a case for the company’s approach from a bio-medical standpoint:

“Vaccines containing defensins as adjuvants have been shown, both in vivo and in vitro, to activate the primary innate antiviral immune response and mediate other immunomodulatory activities against a number of viruses, including coronaviruses. Defensins and their mimetics, like Brilacidin, thus represent promising therapeutics developed as vaccines to target COVID-19, the deadly respiratory disease caused by the novel coronavirus SARS-CoV-2, which has emerged as a worldwide pandemic.”

Thinking Probabilistically

While we can’t possibly estimate the probability that Brilacidin will turn out to be a genuine part of humanity’s long-term solution to COVID-19, we can make some assumptions based on what we understand about markets.

Markets are discounting computational machines. The price discovery process around this terrible disease is a wide open frontier that will take into account all inputs and start with rational pricing assumptions that will move from “very basic” to “very precise” over time.

At this point, the market has to account for anything that has real scientific potential and is being evaluated by legitimate experts.

IPIX would now appear to be on the playing field to enough of an extent that the market will likely have to account for the possibility that it progresses up the probability ladder as the data starts to come into place.

It should also be noted that the company’s key asset is, in addition to this, still the focus of research being conducted on Brilacidin at one of the U.S. 12 Regional Biocontainment Labs (RBL). The RBL is testing Brilacidin’s potential inhibitory activity as a small molecule drug against SARS-CoV-2, the novel coronavirus responsible for COVID-19.

So, there are really two independent stories here for Brilacidin: one is as a therapeutic during treatment as an inhibitor of virulence, and the other newer theme is as a component of an emerging vaccination development process. 

Given the trillions now slated to be spent to rescue the global economy as we wait for some solution, IPIX shares may see some important repricing as the market digests this recent news.