COVID-19 killed the bull market in stocks this year, but at least one stock hasn’t been fazed by the virus. To the contrary, Gilead Sciences (GILD), maker of the Ebola drug-turned-coronavirus drug remdesivir, is enjoying its own private bull market, with its shares up 27% since the year began.
On Wednesday, Gilead shared some of its good fortune with the rest of the stock market, too, as a pair of new remdesivir data releases helped spark a rally that sent the S&P 500 up 2.7%.
So what did Gilead have to say today?
Firstly, according to the company, a National Institute of Allergy and Infectious Diseases (NIAID) study now shows that remdesivir has “met its primary endpoint” and generated “positive data.” Gilead then followed up this news with data from a Phase 3 “SIMPLE” trial it is conducting itself, which showed that “patients receiving a 10-day treatment course of remdesivir achieved similar improvement in clinical status compared with those taking a 5-day treatment course,” with more than 50% of patients in each group showing “clinical improvement.”
How significant are these studies for Gilead?
For two views on the news, we turn to two different analysts — one bullish, one not so much.
Bull first. In the immediate aftermath of Gilead’s news, J.P. Morgan’s Cory Kasimov came out with a note reiterating his “overweight” rating on the stock. (To watch Kasimov’s track record, click here)
In Kasimov’s view, the NIAID data is the more important, inasmuch as it is “placebo controlled and should help put the impact of remdesivir into context.” Although “detailed results” remain to be seen, Kasimov predicts “a high likelihood of approval” of remdesivir given the “unmet need, [statistically significant] benefit, and seemingly acceptable tolerability.”
As regards Gilead’s own SIMPLE study, Kasimov notes “we wouldn’t read too much into the efficacy results” inasmuch as “it lacks a control group” taking a placebo for comparison. That being said, the analyst notes that “only 4-5%” of patients suffered serious “adverse effects” from the drug, which suggests that, however effective it is (or isn’t), at least remdesivir doesn’t seem overly dangerous. In the face of a global pandemic, that may be good enough to get it approved.
Now for the (slightly more) bearish view, this time from Needham analyst Alan Carr.
Carr agrees with Kasimov that the NIAID study is the one to focus on, and the “more valuable” of the two, “given the presence of a placebo control arm.” He also agrees that “the drug is likely to be a helpful tool for COVID-19.”
That being said, Carr reminded investors that Gilead has “stated its intention to make the first 1.5M vials manufactured available for free. This represents about 140,000 10-day treatments and 250,000 5-day treatments” — a significant amount of product being given away for free. The company has not yet decided, moreover, on how (or it) it will price subsequent treatments, assuming remdesivir proves an effective treatment for COVID-19. Nor is it even clear there will be a market for remdesivir, long-term, if effective treatments and/or vaccines are discovered.
Given this uncertainty, Carr advises investors to temper their “revenue and profit expectations” accordingly — and assigns Gilead Sciences stock only a “hold” rating. (To watch Carr’s track record, click here)
All in all, Gilead has drawn optimism mixed with caution when it comes to consensus opinion among sell-side analysts. Out of 28 analysts tracked in the last 3 months, 11 are bullish on GILD, 13 remain sidelined, while 4 are bearish on the stock. The stock’s consensus target price stands at $77, revealing apprehension baked into analysts’ expectations. (See Gilead stock analysis at TipRanks)
To find good ideas for coronavirus stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.