The ongoing COVID-19 pandemic has caused significant disruptions to the global economy, as well as grievances for families witnessing their loved ones die from the virus. Fortunately, there's finally a light at the end of the tunnel as one investigative treatment has revealed potential efficacy for combating the outbreak.
Last week, clinical data from Gilead Sciences (GILD +2.08%) shared with STAT News point to a potential respite in the COVID-19 crisis and possibly significant upside for Gilead investors.
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The good news
Currently, Gilead is investigating remdesivir in multiple phase 3 clinical trials involving over 2,400 participants from 152 clinical sites, including the University of Chicago Medical Center. At this location, 125 patients diagnosed with COVID-19 were treated with daily infusions of remdesivir and had their symptoms monitored over five to 10 days.
Out of this subgroup, only two deaths have been reported with the vast majority of patients already discharged. In other words, the fatality rate (the number of deaths attributable to a disease in a given sample) of the cohort is 1.6%. So far, the results seem superb, as the case fatality rate for COVID-19 in America, calculated via data from John Hopkins University, stands at 4.69%. The case fatality rate represents the number of deaths attributable to the number of confirmed cases of a disease. As of April 19, this amounted to 33,903 deaths per 722,621 diagnosed cases.
At this point, however, skeptical investors may point to the fact that data from the University of Chicago does not have a placebo cohort to compare to, making efficacy claims inconclusive. Currently, no treatments for the COVID-19 have demonstrated efficacy in placebo controlled studies and hence can only be prescribed via either emergency use authorization of compassionate-use.
What the devil's advocates are saying
One counterargument against remdesivir is this: the Centers for Disease Control and Prevention simply does not have enough resources to test everyone for COVID-19. If the number of positive but undiagnosed cases in America was 3 million as compared to 722,621, then the infection fatality ratio of the virus can be as low as 0.91% (33,903 deaths per 3,722,621 infected). Here, the infection fatality ratio is more representative of the true fatality rate of the virus, because it accounts for all possible patients who are infected with COVID-19, not just the ones who were tested.
If used as a benchmark, data from Gilead's treatment cohort will indicate the drug has no effect in improving patients' survival, and may actually be harming them. The point is, without a placebo arm in the trial, we cannot know for sure whether or not remdesivir is working.
What their analysis is missing
Luckily, there is one critical detail in the trial which is extremely likely to point to remdesivir's efficacy. Out of the 125 patients treated, 113 had severe symptoms. As we know, the vast majority of patients with severe symptoms are the elderly and immunocompromised. In one estimate, the infection fatality rate of patients in this category lies between 1.93% to 7.8%.
Given this context, remdesivir may be significantly improving the odds of patients' survival. This is further supported by observations from another study, where a tremendous improvement exists between survival rates (percentage of patients in a study still alive after a given period of time post diagnosis) of patients on invasive ventilators who took remdesivr versus those who didn't.
Those who are not convinced of the drug's economic potential, however, may argue that since infection curves are exhibiting signs of flattening across the world, there will be a lack of demand for remdesivir as the number of new cases drop. There is just one problem with this argument.
In previous respiratory epidemics such as H1N1 in 2009 to 2010 and the 1918 Spanish Flu, there were resurgences of the virus via second and third wave outbreaks after the initial spread was contained. Together, these epidemics infected 24% to 33% of the entire global population before subsiding for good.
Hence, if the COVID-19 was to reemerge, the demand for remdesivir will no doubt be enormous, should it be approved by that time.
What this means for investors
The company's multi-center, placebo controlled phase 3 clinical trials on remdesivir are set to release top-line results by the end of April and is highly likely to be successful. An approval by the Food and Drug Administration can take as little as a couple of months due to the agency's Coronavirus Treatment Acceleration Program. The drug could see over $1 billion in sales over the course of the entire coronavirus outbreak, due to the sheer number of patients infected and potentially at risk for the virus. This is assuming the drug can treat up to 500,000 patients and cost little over $2,000 for one course of treatment.
Gilead is guiding for revenue of over $22 billion in this year and may grow its sales by over 4% via remdesivir alone.This represents a major catalyst for a company trading at 13 times earnings and that saw less than 2% revenue growth in 2019. Meanwhile, potential investors should also be excited to hear about astonishing successes of Gilead's HIV drugs. and recent milestones achieved in its immunoncology portfolios from its acquisitions of Forty Seven and Kite Pharma. Overall, investors who are looking for biotech exposure but are concerned about ramifications of the COVID-19 should definitely add Gilead into their core holdings.
