Robinhood Markets is a financial services company that owns the stock-trading app Robinhood, which is highly popular among millennials. The company has made a habit of maintaining an updated list of the 100 most popular stocks on its platform.
A peek at the stocks in the most recent ranking (as of this writing) reveals that Robinhood investors have been busy buying shares of companies that are involved in the development of vaccines or treatments for the coronavirus. In particular, Gilead Sciences (NASDAQ:GILD) and Sorrento Therapeutics (NASDAQ:SRNE) both feature on the list.
Gilead Sciences is the biotech behind remdesivir, an antiviral drug that could be our best shot at a treatment for COVID-19. Meanwhile, Sorrento Therapeutics boasts several coronavirus-related products in its pipeline. Both of these companies have handily outperformed the market of late, but will they continue to do so? Let's look at each and figure out whether they deserve a place in your portfolio.
Gilead Sciences is more than just remdesivir
Gilead failed to impress investors with its latest earnings report. During the second quarter, the company's revenue of about $5.1 billion was down by about 10.6% year over year, while its adjusted earnings per share were $1.11, down from $1.72 in the prior-year quarter. The company blamed the pandemic, which hurt some of its products' sales, for its poor performance. But long-term investors should look beyond these disappointing results for a few reasons.
First, the U.S. Food and Drug Administration (FDA) issued an emergency use authorization for remdesivir back in May, and the drug was also given the green light in Europe in June. The company should be able to generate some sales from this drug in the coming months.
Second, Gilead remains one of the leaders in the HIV market. The company's HIV and HIV prep products performed comparatively well during the second quarter. Sales in the segment, which made up roughly 79% of the company's revenue during the quarter, declined by 1% to $4 billion. While sales of its hepatitis C products plunged by 47% to $448 million, this segment accounted for just 9% of the company's revenue.
During Gilead Sciences' second-quarter earnings call, CEO Daniel O'Day said that the company's Biktarvy drug has become the "gold standard in HIV treatment." The company boasts other top-performing products in this segment as well.
Lastly, Gilead Sciences boasts a rich pipeline; in particular, it is awaiting a decision from regulators in the U.S. and Europe on filgotinib, a potential treatment for rheumatoid arthritis (RA).
I think it's likely that this drug will be approved and will go on to become a key growth driver for the company, especially considering its edge over its competitors, including AbbVie's (NYSE:ABBV) Humira and Johnson & Johnson's (NYSE:JNJ) Remicade. As Gilead's chief commercial officer, Johanna Mercier, said: "Despite currently available treatment options, many patients are still living with symptoms of inadequately controlled RA around the world. In fact, only one out of five patients living with RA achieve complete remission at year one, which means four to five do not. Filgotinib has a compelling and differentiated clinical profile that we believe may uniquely address the significant unmet need for patients with RA."
For all these reasons, and given that Gilead Sciences is currently trading at just 9.9 times future earnings, I think this healthcare stock is a buy.
Sorrento Therapeutics' hopes hang on its COVID-19 programs
Sorrento Therapeutics is attacking COVID-19 from all fronts. The company boasts potential vaccines, treatments, and diagnostic tests for the disease. Let's go through several of these.
First, the company has developed a neutralizing antibody called COVI-GUARD (also known as STI-1499), which management claimed in May had demonstrated the ability to completely neutralize the SARS-CoV-2 virus that causes COVID-19 in pre-clinical trials.
Second, there's abivertinib, which the company is testing in a phase 2 clinical trial for COVID-19 patients with moderate to severe manifestations of the disease. It is investigating the efficacy of abivertinib on hospitalized patients who have suffered a cytokine storm, a potentially deadly immune reaction that some COVID-19 patients experience.
Third, Sorrento Therapeutics has developed COVI-TRACK, a diagnostic test that it says can detect antibodies to the SARS-CoV-2 virus in eight minutes or less. The FDA is currently reviewing the company's application for an emergency use authorization for this test.
Sorrento doesn't have much going on outside its COVID-19 programs, however. And while the company's coronavirus-related work may seem impressive at first glance, let's not forget that it faces stiff competition across the range of the products it is working on.
Notable companies that have already developed successful tests for COVID-19 include Abbott Laboratories (NYSE:ABT) and Roche Holdings (OTC:RHHBY). While no vaccines for the disease have been approved yet, such biotechs as Moderna (NASDAQ:MRNA), Novavax (NASDAQ:NVAX), and Pfizer (NYSE:PFE) are much further along with their efforts.
What will matter at the end is which products are most effective, so even if Sorrento is behind right now, things could change quickly in its favor. But given what we know now, that outcome seems very optimistic. Investors looking at coronavirus stocks should look elsewhere, since Sorrento Therapeutics seems too risky at the moment.