Coronavirus Drug Results Send Gilead Sciences Stock Flying; JPMorgan Weighs In


As the S&P 500 tumbled 15% over the past two months, shares of biotech Gilead Sciences (GILD) went in a somewhat different direction: Up 15%.

And now it looks like Gilead is going up some more.

New data from a University of Chicago Hospital Phase 3 clinical trial of Gilead’s remdesivir antiviral drug, also known as “GS-5734” shows promising results for the drug’s efficacy in treating the novel coronavirus. And no sooner had the data come out, than Gilead’s stock price began marching higher again, rising 12% in pre-market trading on Friday.

So what did the data show, exactly?

The study in question involved 125 COVID-19 patients (113 of which were “severe” cases). After beginning treatment with remdesivir, some patients were able to stop using ventilators within just a single day. Most of the 125 were able to be discharged before even completing a full 10-day course of treatment, although two patients did die.

At first glance, that sounds like a 98.4% survival rate, significantly above global norms for COVID-19. Still, a few caveats are in order here.

In a write-up on the results, JPMorgan analyst Cory Kasimov called the data “largely anecdotal,” and cautioned that “there’s still a great deal we don’t know,” adding that “thus we hesitate to put too much into the results generated at a single center without a control group.” It’s also worth noting that because so many of these patients were in such dire straits, there was no “placebo” group used in the trial. In a life and death situation like this one, that would have been unconscionable — but a side effect of the lack of a placebo group is that it’s harder to gauge the efficacy of the remdesivir treatments versus a patient population that did not receive the treatments.

That being said, a separate report on the study confirmed that “when we start [the] drug, we see fever curves falling.” Whether those fevers fell faster than untreated patients, and if so, how much faster, may not be precisely known — but at first glance, the results do seem promising.

Promising for both Gilead and for the market at large. As Kasimov points out in his note, “remdesivir data updates” are likely to turn into “potential near-term sentiment catalysts for GILD” stock. What’s more, they are “apparently” going to be catalysts for “the market as a whole,” observes the analyst — referring to the fact that, after the remdesivir update was released, S&P 500 futures leapt higher, and analysts are now looking for the stock market to rise as much as 3% in early trading Friday.

In that regard, Kasimov notes that “we don’t have to wait long for a Phase 3 readout in severe patients” that may be more statistically significant. One clinical trial treating a much larger population of 400 patients with severe COVID-19 infections is expected to report findings in late April, and a separate Phase 3 trial, on moderately ill patients, should produce results by late May.

Considering that Gilead Sciences stock closed Thursday trading at a very reasonable 17.8 times trailing earnings (and an even more attractive 11.6 times trailing free cash flow), it’s not surprising that Kasimov rates Gilead shares an “outperform” along with an $85 price target. (To watch Kasimov’s track record, click here)

If we step back and look at the bigger picture, we can see that overall the stock has a ‘Moderate Buy’ analyst consensus rating on TipRanks. In the last three months, the stock has received 13 “buy” ratings, 10 “holds” and 3 “sells.” With an average analyst price target of $76.44, the risk/reward is balanced at current levels, leaving little room for upside. But it could also be a result of the quick surge and analysts’ inability to turnaround new price targets so quickly. (See Gilead stock analysis on TipRanks)

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