Drugmakers both big and small have jumped into the fray of developing therapies that could treat novel coronavirus disease COVID-19. Even a hint of success have lit a fire beneath the shares of several of these companies so far in 2020.
Two prime examples of this are Gilead Sciences (GILD 1.02%) and Sorrento Therapeutics (SRNE -1.27%). Gilead has without question delivered more compelling results for its COVID-19 drug remdesivir, but Sorrento has been the bigger year-to-date winner in terms of stock performance.
Which of these coronavirus-focused stocks is the better pick? Here's how Gilead and Sorrento stack up against each other.
The case for Gilead Sciences
Gilead's coronavirus credentials are about as good as they come. The biotech's remdesivir has emerged as the de facto standard of care for hospitalized patients with COVID-19 after several positive late-stage clinical studies.
Remdesivir could become even more important in treating COVID-19. It's being evaluated in clinical trials as part of combination therapies with other drugs including Olumiant and Actemra. Gilead plans to soon begin a clinical trial of an inhaled version of the drug.
One analyst projects that remdesivir could generate peak annual sales in the ballpark of $7 billion. But a lot depends on Gilead's pricing for the drug, which hasn't been announced yet.
Meanwhile, Gilead has plenty of growth opportunities outside of COVID-19. The biotech's HIV franchise continues to perform well, led by rising sales for Biktarvy. Cancer cell therapy Yescarta continues to pick up momentum. Gilead awaits regulatory approvals for filgotinib in treating rheumatoid arthritis. The drug could become the company's first immunology blockbuster.
Gilead's pipeline includes quite a few promising candidates. Long-acting HIV drug lenacapavir (GS-6207) could be a game-changer if it's successful in clinical testing. The biotech is evaluating filgotinib in late-stage studies targeting other immunology indications. It has a couple of late-stage programs targeting fibrotic diseases primary sclerosing cholangitis (PSC) and idiopathic pulmonary fibrosis (IPF). In addition, Gilead awaits approval for KTE-X19 in treating refractory/relapsed mantle cell lymphoma (MCL).
Thanks to its strong cash flow, Gilead offers one of the more attractive dividends in the healthcare sector. Its dividend yield currently stands at 3.5%. The company also has a large cash stockpile to use in business development and has been active on this front in 2020, buying cancer-focused biotech Forty Seven for $4.9 billion and signing a $2 billion partnership with Arcus Biosciences.
The case for Sorrento Therapeutics
Sorrento captured investors' attention in May with its announcement that it had identified an antibody that could completely neutralize the novel coronavirus. The biotech stock skyrocketed on the news.
The company followed up earlier this month with an announcement that it had determine that a second antibody held the potential to completely inhibit infection by the virus that causes COVID-19. Both of Sorrento's updates, however, stemmed from preclinical testing only.
Sorrento hopes to move into clinical studies with its experimental COVID-19 antibody therapies. In the meantime, the biotech has a handful of other programs in clinical testing.
Its lead candidate, resiniferatoxin (RTX), is being evaluated in phase 2 studies targeting terminal cancer pain and pain associated with osteoarthritis. Sorrento also has three programs in early stage testing: a CD-38 CAR-T therapy for treating multiple myeloma, a CD-38 antibody-drug conjugate targeting amyloidosis, and cancer immunotherapy Seprehvir.
These programs were attractive enough to prompt an acquisition offer for Sorrento earlier this year. However, the company's board rejected the nonbinding proposal from an unnamed private equity firm to buy Sorrento for up to $7 per share.
Because Sorrento is still a clinical-stage biotech, it's important for investors to closely monitor its cash position. The company had $21.9 million in cash and cash equivalents as of March 31, 2020. Sorrento will undoubtedly need more cash to fund its current clinical programs and advance its COVID-19 programs into clinical testing.
Better coronavirus stock
Positive results for any of its pipeline candidates would send Sorrento's shares soaring in a much bigger way than good news for Gilead would. However, with that potential for huge gains comes a much greater risk level.
My view is that Sorrento is too risky for most investors. Gilead Sciences faces risks as well, notably including the potential for pipeline failures. But Gilead is already highly profitable with several drugs on the market for which sales continue to grow briskly. With these established programs, a solid pipeline, and an attractive dividend, I think that Gilead is the better coronavirus stock -- and the better stock all around.