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The old saw about how to get rich from a gold rush says, Don’t try to strike it rich mining gold; instead sell picks and shovels and blue jeans to the miners.

Same still holds in today’s race to produce an effective and safe coronavirus vaccine. One or two of the dozens of companies working on a vaccine will get it right and investors in that company will see big profits. But investors in the also-rans are likely to see substantial losses–especially since the prices of those stocks have been bid up so strongly.

Better bets would be shares of companies that are selling to all the vaccine companies. Essentially the pick and shovel companies in the vaccine gold rush.

A great piece on Bloomberg “Without Vials and Needles, a Virus Vaccine is Just a Formula: Making sure the world will have enough vials, hypodermics, and adjutants” by Samanth Subramanian on August 12, 2020 sorted through some of the candidates from makers of specialized medical glass to producers of adjutants.

It’s the adjutant makers that deserve attention now, in my opinion, and I’ll be adding two to my Jubak Picks portfolios tomorrow, August 20. The stocks are Amyris (AMRS) and Agenus (AGEN), both very small cap ($742 million and $806 million, respectively) biotech stocks.

So what, you ask is an adjutant?

Think of an adjutant as an accelerant for a vaccine. The adjutant rides along with the vaccine to give it an extra boost that ensures a robust response by the immune system and to enhance the immune system’s memory so that the body will trigger an immune response to the virus months or years after the initial vaccination. The first adjutant was discovered by accident by a French veterinarian. Until the 1990s the most common adjuvants approved for human vaccines were salts of aluminum that were added to vaccines for hepatitis, tetanus, and diphtheria. In the 1990s biotech companies began to develop new adjuvants. QS-21, made by Agenus (AGEN), rides along with GlaxoSmithKline’s shingles vaccine, for example.

Not every coronavirus vaccine now under development requires an adjutant, but many are using one in clinical trials. Adjutants, it seems likely, will be especially critical in boosting the effectiveness of a coronavirus vaccine in adults over the age of 65.

The problem until recently was that the new generation of adjutants had to be distilled from tough to gather natural sources. The active ingredient in QS-21 comes from the soap bark tree the grows in the mountains of Chile. Another key ingredient comes from squalene, which is derived from shark liver oil.

New methods from synthesizing these compounds are arriving just in time to meet the demand from vaccinating the world against Covid-19. Agenus, for example, says that it’s just a few years away from using bioreactors to turn out big supplies of QS-21 without soaptree bark. Amyris (AMRS), an industrial biotech company, says that it is on schedule to advance production of its squalene adjutant to commercial scale this year with full commissioning of a new plant in Brazil set for the fourth quarter of 2021. (Why Brazil? Because Amyris produces its squalene by fermenting raw sugarcane.)

The timing of the advances in adjutant production and the global pandemic have drawn significant funding to what are still very early stage companies without much in current revenue. Agenus had trailing 12-month revenue of just $96.5 million as of the end of the second quarter and trailing 12-month revenue at Amyris was just $134.6 million Both companies ran losses in the last 12 moths of $168 million at Agenus and $326.5 million at Amyris.

But Amyris completed a $200 million round of funding in the second quarter. That let the company reduce debt by $121 million (40%) since the start of 2020. The cost of servicing the company’s debt is projected to fall by $30 million in the second half of 2020. The company is scheduled to deliver 10 tons of squalene adjutant–enough for 1 billion 10-milligram doses–by the end of the year to a major drug company for its coronavirus vaccine candidate.

A stepped-up drive to encourage higher rates of flu vaccination this fall in an effort to head off a big flu season while Covid-19 still rages will also require more adjutant.

Agenus has been on a tear lately with the shares up 71.8% in the last 3 months and 19.31% in the last month. The stock is still up only 5.53% for 2020 to date. The shares closed at $4.32 today, August 19. According to Morningstar, they are still slightly undervalued. My target price is $6 a share.

Amyris has been much less of a rocket. The shares are down 14.7% in the last month, but up 14.24% for 2020 to date. The stock closed up 2.69% today, August 19, at $3.65. Morningstar rates these shares as undervalued as well. My target price is $5.50 a share.

Please note that these are volatile small caps and hence only for those with a high tolerance for risk.

Full disclosure: I will be adding Amyris and Agenus to my personal portfolio 3 days after this post is published.