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Why Gilead Sciences Is the Front-Runner in the COVID-19 Treatment Race

By Zhiyuan Sun – Jul 15, 2020 at 7:30AM

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Gilead Sciences' remdesivir has the potential to save many lives -- and enrich many investors of the company's stock in the process.

Between its inception in Wuhan, China, in December 2019 and July 11, the number of coronavirus cases in the world has skyrocketed to 12.8 million. Approximately 565,397 people worldwide have died from COVID-19, making this disease anywhere between 4 to 8 times as deadly as the H1N1 swine flu from 2009. In high-population countries such as the U.S. and Brazil, cases are increasing day by day.

Currently, there is no vaccine for COVID-19, and treatment options are limited for patients with severe or life-threatening symptoms. However, one treatment that is rapidly gaining traction is Gilead Sciences' (GILD -0.44%) remdesivir. This viral inhibitor has shown preliminary survival benefit when given to patients suffering from life-threatening symptoms of COVID-19. Today, let's take a look at why I think remdesivir is already a multibillion-dollar opportunity for Gilead. 

Infected patient in quarantine lying in bed in hospital.

Image Source: Getty Images.

The best COVID-19 treatment so far

On July 10, Gilead announced comparative analysis results from its phase 3 clinical trial investigating remdesivir's efficacy in critically ill patients with COVID-19. In a real-world study of severely ill COVID-19 patients, 12.5% of patients who were hospitalized but did not receive remdesivir died within two weeks; that number was 7.6% for those who did receive it.  

Additionally, patients who took remdesivir had faster recovery times than patients who didn't. Interestingly, hydroxychloroquine, a drug touted by the Trump administration as a miracle cure for COVID-19, actually lowered patients' recovery rates when given on top of remdesivir. 

The results for remdesivir are nothing short of superb. Indeed, before the results were even published, the Trump administration purchased Gilead's entire stockpile of 500,000 vials of remdesivir. At $390 per vial, that meant $195 million in new revenue for Gilead in a little over a month. That's a lot for a company that has had declining revenue for some time; revenue reached $22.5 billion last year.

Why Gilead is a strong buy

Gilead plans to produce up to 2 million treatment courses (each containing six vials) by the end of the year, including the amount it already sold. At 12 million vials costing $390 each, that's $4.7 billion in potential revenue, compared with a research and manufacturing cost of about $1 billion to develop the drug! Furthermore, the company has ample production capacity to produce several million courses in 2021. The U.S., E.U., India, Australia, and Japan have all either authorized remdesivir for emergency use or approved it for the treatment of COVID-19. Gilead has licensed remdesivir generics to 127 countries, all of which are middle or low income.

With 14% of COVID-19 patients developing severe symptoms and 5% requiring intensive care, I expect Gilead and its stock to be amply rewarded for producing a lifesaving treatment. Due to recent mutations, the currently circulating strain of SARS-CoV-2 may be 2.6 to 9.3 times more infectious while being just as lethal. Hence I do not expect the COVID-19 pandemic to subside anytime in the near future. With an increasing demand for remdesivir, I highly recommend biotech investors add Gilead to their portfolios

Zhiyuan Sun has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has a disclosure policy.

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