On Sep. 22, Fujifilm (FUJIY 0.32%) reported that a phase 3 clinical trial of its influenza pill, Avigan, showed the treatment's ability to reduce the recovery time of patients with mild cases of COVID-19. These results gave Fujifilm's stock a small bump of more than 4%, but the market's response was largely muted. Did the market properly price in Fujifilm's breakthrough, or is Avigan still a potential goldmine for long-term shareholders?

In my view, Avigan is not the drug that will make COVID-19 an inconvenience rather than a life-threatening disease. But, as with Gilead Sciences' (GILD -0.21%) underwhelming antiviral medicine remdesivir, Avigan's modest effectiveness at treating COVID-19 might be enough for future therapies to build on with combination treatments. Thus, in the long term, Avigan could deliver some value for Fujifilm's shareholders based on what we currently know about its efficacy. Let's analyze why this is the most likely case and see how investors should plan accordingly.

A scattering of pills of different shapes, sizes, and colors.

Image source: Getty Images.

Avigan isn't a magic bullet -- or is it?

Clinical trials have painted contrasting images of Avigan's utility and efficacy. Fujifilm initiated phase 3 clinical trials of Avigan in Japan in March, recruiting 156 patients infected with the coronavirus. People with non-severe pneumonia who took Avigan recovered from their non-severe coronavirus infections in a median of 11.9 days, compared to a median of 14.7 days in the control group that didn't get the drug. Study participants reported few side effects, and none that were unknown to researchers before the trial. 

Loosely, this means that Avigan helped people to recover by around three days faster than they would otherwise. With such a small improvement, it would be difficult to see the case for Avigan being a first and best-option treatment for the disease.

Fujifilm's in-house clinical trial is not the only test of Avigan's effectiveness, however. The influenza drug is currently being used to fight COVID-19 in Russia, China, and Japan, and there are 25 ongoing clinical trials for the drug worldwide. In one 50-patient clinical trial sponsored by the Bangladesh Society of Medicine, a generic version of Avigan allowed 48% of patients with non-severe cases of the coronavirus to test negative for the virus within four days after initiating treatment, in comparison to 0% of the patients who weren't treated. Unlike what was shown in Fujifilm's trial, these results could be a game-changer for treating COVID-19. But there's no easy way to reconcile the dramatically different readouts from the two trials without more research to clarify which is closer to the truth.

Will Avigan revenues be relevant?

Because there is no scientific consensus on Avigan's effectiveness, healthcare investors need to plan for the more conservative case wherein Avigan is somewhat helpful, but hardly revolutionary. In this vein, there are two important issues: patent exclusivity and revenue growth potential. The bad news for investors is that Avigan lost its patent exclusivity last year, and a handful of international manufacturers have started to produce it in a generic form since then. As a result, if Fujifilm wants to get the most mileage out of Avigan, it will need to invest in new research. 

The good news is that there are still a couple of vectors for Avigan to drive revenue growth without further investment. In particular, Japan aims to triple domestic production of Avigan by the end of September to ensure that the national stockpile can meet local demand, and Fujifilm may also earn a direct investment from the Japanese government as part of its economic stimulus plan.

Globally, more than 30 countries have contacted Fujifilm to procure Avigan, though in some cases the company has committed to donating doses for free. Aside from global sales, Avigan is also being investigated by various research groups as part of combination therapies that include other antiviral drugs. If these trials appear to help patients more effectively than Avigan alone, Fujifilm will doubtlessly benefit.

Avigan's success probably won't be smashing

In summary, investors can expect Avigan to provide Fujifilm with at least a marginal amount of revenue growth over the next few years. There's a small but non-negligible chance that follow-up data from ongoing clinical trials will make Avigan into a moderately sized cash cow. But if you're looking to get rich, Avigan isn't going to turn Fujifilm into a millionaire-maker stock. However, it just boost the company's growth enough to beat the market.