At the beginning of this month, the U.S. Food and Drug Administration (FDA) authorized Gilead Sciences's (NASDAQ:GILD) remdesivir for the treatment of severely ill COVID-19 patients. Currently, remdesivir is the first drug authorized for the disease that has demonstrated efficacy in placebo-controlled, phase 3 clinical trials. 

While most are excited about the potential relief Gilead could bring to COVID-19 patients, a group of smart investors has argued that the company itself is a poor investment opportunity due to an overlooked detail in remdesivir's data. Believe it or not, these individuals actually present a very good case. Let's see why. 

What the skeptics are saying

The gist of skepticism surrounding remdesivir's success seems to stem from a question asked by a Bank of America analyst during Gilead's recent earnings call:

Just want to say great job for the whole team really for remdesivir development. A couple of points here on COVID-19. Have you guys looked at other [nucleotides] for earlier-stage patients? I know you guys have a lot that is there that could be more applicable to some mild to moderate patients. 

Doctors holding a conferecne about treatment of the coronavirus.

Image source: Getty Images.

Well, that is a good question, because to date, remdesivir has only been tested in patients with severe symptoms or those who are critically ill after being infected with the coronavirus. Gilead's management responded to the question by simply reiterating the fact that it was testing its most promising COVID-19 candidate, remdesivir, in patients with moderate symptoms.

This brings us to the main point: The drug's efficacy has not yet been confirmed in patients who develop only mild or moderate symptoms -- that is, who are neither hypoxic (with an absence of oxygen) nor requiring oxygen support or ventilation.

What about the milder cases?

It is now well known that seniors and those who are immunocompromised are most at risk of being hospitalized from the coronavirus. Recently, data has shown that in the U.S., no more than 2.5 individuals out of 100,000 people up to age 49 in the general population will require hospitalization after becoming infected with the coronavirus. However, the hospitalization rates jump to between 7.4 and 17.2 per 100,000 individuals 50 or older in the general population. 

This poses a limitation for remdesivir, because the drug demonstrated a moderate reduction -- 31% -- in time to recovery and a small survival benefit of 3.6% (which has not yet reached statistical significance) in COVID-19 patients who are severely ill. Because the benefit isn't very large, it may disappear entirely when given to healthier patients who can rely on their own immune systems to combat the virus. 

Another financial risk ahead for remdesivir is the phenomenal speed at which vaccines are being developed. It took three years for a vaccine to enter phase 1 clinical trials when the SARS-CoV-1 pandemic swept the world between 2003 and 2004. However, biotech companies such as Moderna (NASDAQ:MRNA) have seen their COVID-19 vaccines release interim phase 1 results much more quickly -- as few as two months after the World Health Organization declared the disease a pandemic. Moderna specifically is planning mass production of its vaccine by next year if it's successful in human trials.

If a vaccine becomes available and widespread, then remdesivir's only benefit would as a treatment for COVID-19 in those who develop severe symptoms and are too far along for a vaccine to be effective. In this scenario, there would no doubt be a dramatic reduction in demand. 

To make the drug's financial case worse, Gilead has licensed rights to manufacture remdesivir to generic pharmaceutical companies in more than 120 countries. The company has chosen to waive all royalties on the drug's sales until the pandemic subsides, a competitor treatment comes out, or a vaccine is developed. 

There is no doubt a lot of hype surrounding remdesivir's financial opportunity. Some analysts are predicting it will generate billions in revenue based on estimates that a fair price for the drug can be as high as $4,460 for one course of treatment. On the other hand, these estimates may be a little too rosy.

Takeaways for investors

First of all, the company is giving away intellectual property rights to the drug essentially free of charge to many countries in the world, and has pledged to donate at least 1.5 million doses. Second, if a vaccine is developed in time, then sales of remdesivir will plunge drastically. It is very likely remdesivir will generate a one-time cash flow for Gilead, then be forgotten again as other, more effective treatments take the stage.

I think Gilead is a solid buy for what the rest of its pipeline can provide. But for investors who are interested in buying it only for the sake of its coronavirus treatment, now is simply not the time. At the very least, before starting a position in the stock, it's best to wait until the end of the month for clinical trial results for remdesivir in moderately ill COVID-19 patients.