Since the start of the coronavirus pandemic and the race to find a vaccine or treatment for the disease began, a few stocks have consistently made it to the top of the news cycle. Gilead Sciences (GILD +0.39%) is one of them. While the broader stock market took a nosedive in March as the coronavirus swept across the globe, Gilead Sciences was one of the very few pharmaceutical companies that remained resistant to the recession.
In fact, Gilead shares rose while other stocks dropped in the bear market plunge. Currently, Gilead stock is priced right around 15% below its 52-week high and 20% above its 52-week low. The company reported excellent first-quarter earnings results at the end of April, with gross revenue up by 5% on a year-over-year basis. Domestic and global sales also received a boost in the first quarter of 2020, with U.S. sales totaling almost $4 billion and sales in other markets reaching $1.4 billion.
As impressive as Gilead's performance has been amid a struggling global economy, this isn't the only reason everyone's been talking about this stock.
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Remdesivir may be poised for blockbuster success
Gilead first launched studies of its antiviral drug remdesivir as a potential treatment for patients infected with the novel coronavirus on Feb. 26. The U.S. Food and Drug Administration (FDA) had just accepted the company's investigational drug filing to use remdesivir as a coronavirus treatment. At the time, the company stated it was launching two phase 3 open-label human trials, mainly focusing on patients in Asian countries and other locations where the rate of infection was high. To date, studies have been conducted at over 180 trial sites globally.
On April 10, the first wave of data on the efficacy of remdesivir from a cohort analysis of 53 critically ill coronavirus patients was released and published in the New England Journal of Medicine. Gilead's April 10 press release noted the following findings:
Nearly two-thirds of patients ... were on mechanical ventilation at baseline. ... Treatment with remdesivir resulted in an improvement in oxygen support class for 68 percent of patients ... over a median follow-up of 18 days from the first dose of remdesivir. More than half of patients on mechanical ventilation were extubated ... and nearly half of all patients ... were discharged from the hospital following treatment with remdesivir.
On April 29, the first concrete findings from two studies on remdesivir came through. One set of findings was from a placebo-controlled study run by the National Institute of Allergy and Infectious Diseases, while the other was data from one of Gilead's phase 3 human trials of the drug studying critically ill patients who had been hospitalized with COVID-19. The findings from both studies were positive, with the data from Gilead's in-house study revealing that severely ill coronavirus patients who had taken remdesivir in a five-day dosage period made similar strides toward recovery as patients administered the drug over a 10-day treatment course.
Shortly after the release of this encouraging data, Gilead announced on May 1 that the FDA had issued an emergency use authorization (EUA) for remdesivir. The EUA means that hospitals across the country have FDA authorization to use remdesivir to treat individuals severely ill with COVID-19 on either the five or 10-day dosage duration, depending on the patient's condition. Gilead noted that the U.S. government would be overseeing the distribution of the drug to hospitals in cities with the highest infection rates, and that "...hospitals with intensive care units and other hospitals that the government deems most in need will receive priority in the distribution of remdesivir."
On June 1, the much-awaited results of Gilead's second phase 3 human study, this one of moderately ill coronavirus patients, were released. The trial dosed participants with moderate cases of COVID-19 on five and 10-day regimens of remdesivir, in co-occurrence with the standard of care treatment. A third group received the standard of care only. Both the five and 10-day dosage regimens produced positive outcomes for moderately ill coronavirus patients. However, the most notable improvements were recorded in moderately ill COVID-19 patients who took remdesivir for five days, as they "...were 65 percent more likely to have clinical improvement at Day 11 compared with those in the standard of care group."
Gilead has pledged to donate about 1.5 million doses of remdesivir to ongoing clinical trials and through its expanded access and compassionate use programs. Japan approved the use of the drug on May 7 and is the first country to do so. Elsewhere, remdesivir is still being used as an investigational drug. Singapore just granted conditional approval of remdesivir.
A possible merger?
Another bit of news that captured investor attention last week was Bloomberg's report that multinational pharmaceutical and biopharmaceutical company AstraZeneca (AZN +0.00%) was in talks with Gilead about a prospective merger. Given Gilead's current market valuation just under $100 billion, and AstraZeneca's astonishing $140 billion valuation, it's no surprise that investors were champing at the bit at the prospect of what would be the largest ever pharma merger.
The hype was short-lived, it would seem, as The Times reported on June 8 that the idea of a potential merger had effectively been scrapped. One possible reason for this rapid shift is the fact that AstraZeneca is working on its own manufacturing deals in the race to get a COVID-19 vaccine in the hands of the public, one of which is in partnership with the University of Oxford. While it's highly possible that Gilead could be eyeing potential merger opportunities for down the line, the company's strong product portfolio and core valuation make this stock one to watch regardless.
Keep your eyes on Gilead
I previously maintained that Gilead Sciences stock is not one for risk-averse investors, the chief reason for this being that the hype surrounding remdesivir may be overinflating shares. Of course, investing with a long-term mindset is about striking that intricate balance of risk vs. reward.
There's also been measured skepticism about the long-term effect that remdesivir could have on Gilead's top and bottom line since the company has essentially been giving the drug away free of charge. While the company's future pricing of the drug remains unknown, some analysts are starting to predict blockbuster success for remdesivir.
In early June, SVB Leerink analyst Geoffrey Porges changed his previously modest assessment of the drug's future profit potential, stating that he projects remdesivir sales could hit $7.7 billion by the year 2022. Porges stated that remdesivir could cost approximately $5,000 per course in the U.S. market and $4,000 per course in Europe. We should know more about Gilead's pricing structure for the drug in the coming months. One thing's for sure, though. If sales of remdesivir get anywhere close to Porges' valuation, investors could be sitting on a veritable gold mine.
