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Have Gilead's Gains Evaporated in the Coronavirus Treatment Race?

By Adria Cimino - Nov 28, 2020 at 7:11AM

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Rivals and vaccine developers have pushed this early leader out of the spotlight.

Key Points

  • The World Health Organization recently advised against using Gilead’s Veklury to treat coronavirus patients.
  • Other trials have shown that Veklury shortens recovery by five to seven days.
  • Veklury drove an 18% gain in product sales in Gilead’s most recent quarter.

Our experts issued a rare "Double Down" Buy alert on this one stock... Learn more.

Gilead Sciences ( GILD 0.36% ) started the year strong. The company's antiviral drug, remdesivir, emerged as a potential treatment for COVID-19 in the early days of the outbreak. As a result, while the rest of the stock market slid, Gilead did just the opposite. The stock climbed 29% from the first day of the year through its peak in April.

But as the coronavirus vaccine race heated up, Gilead shares lost their sparkle. Even U.S. Food and Drug Administration (FDA) approval for remdesivir, marketed as Veklury, failed to reignite interest in October.

To make matters worse, the World Health Organization (WHO) recently advised against using remdesivir as a treatment for COVID-19. The WHO said evidence didn't show improved survival in patients using the treatment. Now, as other treatments enter the market and a possible vaccine comes into view, are Gilead's gains over?

Three doctors gather to discuss coronavirus and treatment options.

Image source: Getty Images.

From emergency use to approval

First, a bit of background on remdesivir. The drug works by halting the replication of the virus that causes COVID-19. It's approved for the treatment of adults and children age 12 and older who require hospitalization. Prior to full approval in October, remdesivir had already received Emergency Use Authorization (EUA).

Is the WHO right about remdesivir? The international body hasn't made all data from its trial involving remdesivir public. Data supporting the antiviral, however, has been peer-reviewed and published. A trial by the National Institute of Allergy and Infectious Diseases showed the treatment shortened recovery of hospitalized patients by five days. And the drug shortened recovery by seven days for patients requiring oxygen. Those results and the fact that 50 countries have authorized or approved remdesivir are pretty convincing -- at least based on what we know so far.

Now, onto the next question: Will the WHO's comments or other treatments and vaccines hurt Gilead? I don't think treatments will immediately impact the use of remdesivir. Hospitals worldwide have already integrated the drug into patient care. And so far, other authorized treatments are meant for earlier stages of illness. For instance, Eli Lilly and Regeneron Pharmaceuticals recently received EUAs for antibody treatments -- but those are meant to prevent hospitalization.

The entrance of vaccines

As for vaccines, it's highly unlikely they'll absolutely eradicate the coronavirus in the near future. Treatments such as remdesivir will continue to be needed as people are infected. Still, the entrance of vaccines to the market will reduce the number of hospitalized coronavirus patients. And that means less growth for Gilead's sales down the road.

In the most recent quarter, remdesivir drove an 18% product-sales gain for Gilead year over year. Excluding remdesivir, product sales only rose 2%.

Looking beyond the antiviral, earlier this year, investors were optimistic about the prospects of filgotinib, Gilead's investigational treatment for rheumatoid arthritis. But a regulatory stumble pumped the brakes on that optimism. Though the European Commission recently approved the drug, the FDA's pass on filgotinib this summer represented a significant setback.

Gilead said meetings with the regulatory agency may reveal information important to filgotinib's development in other indications. That's why the company has paused enrollment in filgotinib trials in psoriatic arthritis, ankylosing spondylitis, and uveitis pending a fourth-quarter FDA meeting. This clearly slows filgotinib's progress in more than one indication.

A recent acquisition

Gilead's recent acquisition of cancer-therapy company Immunomedics could be a future growth driver. The company predicts it will immediately boost revenue growth and be "significantly accretive" to non-GAAP earnings per share after 2023. Gilead also continues to benefit from its HIV portfolio. Blockbuster Biktarvy's revenue jumped 50% in the most recent quarter year over year.

I'm not sure these positives will be enough to drive share growth in the coming months. Investors in Gilead this year were betting on the company as a coronavirus investment. And that movement is over.

Can it be revived? Perhaps -- if more data on remdesivir pushes it back into the spotlight in a positive way. Ongoing trials are studying the drug combined with anti-inflammatory agents.

And what happens if remdesivir doesn't return to the forefront? Investors may have to wait a while for further gains in this biotech stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
$69.81 (0.36%) $0.25
Eli Lilly and Company Stock Quote
Eli Lilly and Company
$241.95 (-1.48%) $-3.63
Regeneron Pharmaceuticals, Inc. Stock Quote
Regeneron Pharmaceuticals, Inc.
$626.41 (-1.38%) $-8.75

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