Inovio Pharmaceuticals (INO -0.36%) and Gilead Sciences (GILD -0.47%) are major competitors in the growing market for coronavirus products, making both tantalizing stock picks. Inovio's stock has soared this year thanks to its INO-4800 coronavirus vaccine project, which has so far proven effective at producing immunity in primates. In contrast, Gilead's stock has consistently struggled despite the commercialization of its antiviral drug, remdesivir, which may be effective at helping patients recover from COVID-19.
October is a particularly dangerous time for both of these stocks, and investors should probably steer clear. But within a month, there will be new developments within each company that could change their long-term outlooks. If you're thinking about scooping up shares of either of these companies this fall, you'll need to see how this month's hazards affect their prospects in the markets for coronavirus treatments and vaccines.
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Inovio's vaccine trial came to a grinding halt
Since Inovio's coronavirus vaccine clinical trial was forced to partially pause in late September, the company's future has been uncertain. As soon as Inovio announced that it wouldn't be able to proceed along with the vaccine's next phase of clinical trials, the stock tumbled sharply. Unlike the other coronavirus vaccine trials that have been forced to pause, Inovio's pause is not a result of any adverse or unexpected side effects in the clinical trial's participants. Nor is it the result of any revealed weaknesses in the company's finances that might threaten its long-term merit as a healthcare stock. Instead, Inovio indicated that the U.S. Food and Drug Administration (FDA) had unanswered questions pertaining to the vaccine's next set of clinical trials.
As a result, the company's phase 1 clinical trial can continue to dose new patients, but the next phase won't be allowed to start until Inovio addresses the FDA's concerns. This type of pause is somewhat common in drug development, but in general, it happens to smaller biotech companies more frequently than it does to larger pharmaceutical companies that have more experience in the regulatory approval process. Inovio expects to submit a packet of information to the FDA sometime in October, after which regulators will have 30 days to decide whether to give the trial the green light for a restart. It's unclear whether Inovio has submitted the information yet, but every day that passes is a day in which competitors can move forward with their vaccine projects. A continuous delay could devastate Inovio's stock even more, so it's best to steer clear for the meantime.
Gilead's antiviral faces an increasingly skeptical scientific audience
At the start of the pandemic, remdesivir seemed like it might be effective at reducing the recovery time for patients hospitalized with COVID-19. This finding was substantiated by follow-up research by Gilead as well as third-party investigators. But widespread use in coronavirus clinics showed that remdesivir wasn't a silver bullet, and Gilead's share price shed its early year gains. Then, on Oct. 16, a major study by the World Health Organization (WHO) found that remdesivir does not reduce the risk of dying from COVID-19, and it may not reduce the risk of a patient needing supplemental oxygen or a ventilator.
On top of that bad news, remdesivir may not actually be profitable for Gilead to produce, and sales of the antiviral to date are far lower than the company's prediction of $3 billion through 2020. The Department of Health and Human Services (HHS), which was responsible for distributing remdesivir as part of an agreement with Gilead, reported that U.S. hospitals purchased only 32% of its supply of 500,000 doses in the second quarter. At the same time, the E.U. purchased a mere 30,000 doses in July -- far lower than the 500,000 that it reserved the right to purchase through the start of next year.
In short, Gilead is facing twin threats to remdesivir: low efficacy and weak sales. While the company is working on developing new products containing remdesivir that could prove more effective, it's hard to see how its stock could go anywhere but down in the meantime. Gilead's progress may well make it worth a reevaluation in a few months, but it is best for investors to avoid it for now.
