For years, Gilead Sciences' (NASDAQ:GILD) stock price has been rather disappointing for investors hoping for long-term capital appreciation. While shares do boast an impressive 3.63% dividend yield, the company's revenues have experienced an enormous decline from 2015 onwards, falling over $10 billion in the past four years as patients cured of hepatitis C no longer needed drugs from Gilead.

In a twist of fate, however, a once little-known drug manufactured by the company during the Ebola virus pandemic may hold the cure to the current coronavirus outbreak, and thereby significantly improve the company's bottom line. 

A doctor and patient in a Coronavirus triage bay in a hospital

Image Source: Getty Images

A potential treatment for COVID-19

The drug in the spotlight is remdesivir, a nucleotide analog (which are antiviral agents that can stop viral DNA synthesis) hypothesized to block a specific enzyme required during the replication process of the coronavirus. In a compassionate use clinical trial published last week in The New England Journal of Medicine, 36 out of 53, or 68%, of COVID-19 patients witnessed an improvement in oxygen support after three weeks of treatment with remdesivir. Since the study was conducted without the use of a placebo cohort (or control arm), it cannot definitively be concluded the drug has a positive effect on patients. For example, the 68% improvement in oxygen intake could simply be attributed to patients' own immune system fighting off the pathogens. 

There is, however, one detail in the trial which may support remdesivir's efficacy. Within a subgroup of patients requiring invasive ventilation, the mortality rate was found to be 18% after treatment. In other words, 28 out of 34 patients in this subgroup recovered. In context, one report from China showed a 86% mortality rate for COVID-19 patients requiring invasive ventilation. Another report, published by the UK's Intensive Care National Audit Center, showed coronavirus patients who needed ventilators (both invasive and non invasive) had a mortality rate of 50%. The study involved at least 690 patients, making it highly statistically significant in terms of representing the overall population. Moreover, a recent report from New York City revealed the mortality rate in this category of patients to be 80%.

While the high fatality rate in these studies may be attributed to constraints in hospital space and resources in different test centers, the sheer discrepancy between mortality rates of patients requiring ventilation who are treated with remdesivir and those who were not, points to potential efficacy of the former. 

The next steps

To combat the shortcomings of the compassionate use trial, the company is currently investigating the drug in at least five multicenter, randomized, placebo-controlled phase 3 trials around the world. Recently, Gilead suspended a clinical trial in China. This was neither related to the safety nor efficacy of remedesivir, but rather due to lack of enrollment, which is actually a positive sign. The suspension is sound because China has seen its new COVID-19 case count drop to double digits nationally, with less than 2,000 patients currently in treatment. Recruitment has undoubtedly become a problem there, but not for the rest of the world, where the outbreak is still growing day by day.

At least one of the clinical trials mentioned will release its results this month. If successful, the drug will likely see a quick path to approval as a part of the Food and Drug Administration's new Coronavirus Treatment Acceleration Program.

Considering other potential therapies such as AbbVie's (NYSE:ABBV) Kaletra stumbled in one investigation and how hydroxychloroquine was revealed to possess serious adverse events such as sudden death, remdesivir has become the leading candidate in potentially combating the coronavirus. If approved, the drug can reach hundreds of millions of dollars in sales thanks to a first-mover advantage, and the high volume of patients diagnosed with COVID-19. 

Is Gilead a buy today?

In essence, potential investors will inherit Gilead's renowned HIV, hepatitis C, hematology, and oncology portfolios. Together, these assets boast more than 24% in net margins but are growing less than 2% per year. As a result, remdesivir represents a major catalyst for the healthcare stock's price. 

The company recently announced plans to buy Forty Seven (NASDAQ:FTSV) for $4.9 billion in cash, so investors should also keep an eye on synergies from this deal once it closes. The acquisition builds on the immuno-oncology portfolio that began when Gilead bought Kite Pharma in 2017.

Since 2016, Gilead's stock has been trading at a discount compared to other biotech companies due to its suboptimal revenue growth. Now, with just 4x price-to-sales, 12x price-to-earnings, a hefty dividend payout, and a growth catalyst, Gilead is prime for a significant rebound. Investors should consider adding shares to their portfolio today.