As stocks ended trading in a bear market this week, Gilead Sciences (GILD 0.42%) continued to climb, extending its gain this year to 8%. Meanwhile, the S&P 500 was down 21% over the same time period.
The latest news to boost the stock was a comment by the Centers for Disease Control and Prevention director saying Gilead's remdesivir was available via "compassionate use" to coronavirus patients in Washington state. While this is positive news and plenty of reason for a short-term gain, the rest of the company's pipeline is what makes it deserving of a spot in long-term investors' portfolios.
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First, here's a summary of remdesivir's trajectory. As the coronavirus turned from epidemic to pandemic and resulted in more than 132,000 cases worldwide, companies working on coronavirus treatments and vaccines posted share gains. Gilead's remdesivir isn't an approved drug, and as of January had only demonstrated activity in animal studies against similar coronaviruses, Middle East and severe acute respiratory syndromes (MERS and SARS). Considering the lack of treatment options for patients with COVID-19, which is caused by the novel coronavirus, authorities made it possible to offer remdesivir to some patients.
Treatment shows promise
By the end of February, Gilead announced the start of two phase 3 trials. Reports of a World Health Organization doctor saying the treatment showed promise and the confirmation that remdesivir is being used in the U.S. outbreak epicenter have pushed Gilead to the forefront.
Like Gilead, other companies researching coronavirus prevention or treatment have been popular with investors. Moderna (MRNA 1.84%), which is working on a vaccine, is up 3% since the start of the year. Vir Biotechnology (VIR +0.44%) announced this week it struck a partnership with the National Institutes of Health to identify antibodies for vaccine development. Vir shares have climbed 188% this year.
Short interest in Moderna, Vir, and Gilead has also increased in recent days, indicating a growing number of investors are betting on future declines. In short selling, investors borrow shares of a company to sell now for a gain with a promise to buy it back later with the hope of profiting on the spread.
The race has not yet been won
Moderna, Vir, and Gilead may have further to go in the near term as they continue to benefit from euphoria over a possible coronavirus treatment. And more positive news about remdesivir will surely push Gilead shares even higher. But now is the time to think about which coronavirus players may be able to maintain performance well after the global public health crisis has subsided.
Moderna and Vir are both clinical-stage companies, and so far, their research is from pre-clinical through phase 2 trials. While the companies have interesting platforms, without marketed products or products that have proven human efficacy in late-stage testing, I'm concerned about share performance once the market is less enamored by coronavirus research. Gains have happened a little too quickly, without thought of future revenue and earnings to sustain market value.
The next catalyst
Even though Gilead shares may not post the same rapid increase once the pandemic is over, the company's pipeline and marketed products should keep things moving in a positive direction. The next catalyst for Gilead may be the U.S. Food and Drug Administration's decision on its rheumatoid arthritis treatment, filgotinib. Gilead submitted the drug for review in December with a priority review voucher, which generally reduces review time to about six months from the standard of 10 months. EvaluatePharma predicts filgotinib could bring in global sales of $1.3 billion in 2024. Gilead, in its recent earnings call, mentioned the potential for launches in five new indications over the next four years.
As for already marketed drugs, HIV product sales rose 12% in the fourth quarter and for the whole year. Biktarvy, an HIV drug approved in 2018, led gains as more and more patients began taking the treatment. An Allied Market Research report predicts the HIV drug market will reach $26 billion by 2022 from $20 billion in 2015. That indicates further growth potential for Biktarvy.
All of this means that, while Gilead shares may post gains on coronavirus news in the coming weeks and some declines when the outbreak eases, upside potential remains for this biotech stock. New drugs like Biktarvy and late-stage candidates form the pipeline should produce earnings, and therefore share performance, over the long term.
