What happened

Shares of Inovio Pharmaceuticals (NASDAQ:INO) and Vir Biotechnology (NASDAQ:VIR), two companies developing drugs for the coronavirus outbreak in China, are down today on word that Gilead Sciences (NASDAQ:GILD) looks to have beaten the companies to the punch, setting up a research collaboration with Chinese authorities to run a clinical trial for its antiviral medication remdesivir.

As of 1:46 p.m. EST on Monday, Inovio had fallen 14.5%, while Vir was down 16.2%.

People on the sidewalk wearing face masks

Image source: Getty Images.

So what

While the news that Gilead has moved first is disappointing for the biotechs, there may still be a need for Inovio's 2019-nCoV coronavirus vaccine. Remdesivir might lessen the symptoms of the virus, but it won't stop the spread of the disease in mildly symptomatic patients who aren't likely to take the drug.

Vir's antibody treatment would likely compete more directly with remdesivir since it would attack the virus directly and would likely be used to treat infected patients.

Both Inovio and Vir increased in value quite a bit in January. Vir doubled, while Inovio was up almost 40% as the 2019-nCoV coronavirus outbreak has spread and investors pinned hopes on the potential to develop drugs for the virus. With the valuations already incorporating some of the potential, it's not surprising to see a pullback on news that the opportunity might not be as large as first imagined.

Now what

The bigger issue for Inovio and Vir is how long the clinical trial process could end up taking and whether the outbreak will peter out before the companies can get their treatments to market.