Posted 4/18/2020 1:51 PM (GMT -6)
Some interesting things to consider concerning Gilead from an article that was passed on to me...
Curb Your Enthusiasm on Gilead
Buying stocks on anecdotal Covid-19 patient data is a bad idea. A viable treatment for Covid-19 is desperately needed, but investors are way too enthusiastic about the latest potential breakthrough.
Stat News reported Thursday that a subset of Covid-19 patients receiving the drug remdesivir had
improved. Of 113 patients in this subset, only two had died and the majority of the others had been
discharged from the hospital. These patients are enrolled in a larger clinical trial.
Shares of Gilead Sciences Inc., GILD 9.73% which owns the drug, surged Friday in response. Since Covid-19 data readouts have implications for the entire economy as a whole, the report was likely a factor in Friday’s market rally. While that news is wonderful for the patients involved and encouraging for the general public, investors should be skeptical. The exuberance is “out of control,” Baird analyst Brian Skorney said in a note to clients. “We are cautious on interpretation of what amount to leaked case reports, given the frequency with which we have seen randomized, controlled data refute previously ‘encouraging’ data from small, uncontrolled studies.” More definitive answers about whether the drug works are unlikely until late May, he added. Another issue is that, while these patients are considered to have severe symptoms, none were on mechanical ventilators or experiencing organ failure. It is unclear whether the death rate experienced in this subset is any different from that of patients not receiving the drug. There is still no clear data on whether the drug reduces viral load in patients, which is key to understanding its true power. It is unrealistic to expect Gilead’s drug remdesivir to be useful for all Covid-19 patients.
Even if the drug helps patients get better, investors are ignoring other relevant considerations. Remdesivir is administered intravenously in a hospital setting and carries the risk of significant side effects. It is unrealistic to expect the drug to be useful for all Covid-19 patients. An effective treatment for some will be a big step forward toward a return to normal life, but won’t solve other key problems, such as insufficient testing. As for investors buying Gilead shares, any future sales would be barely significant, since the company already books about $20 billion in annual revenue. The company has committed to donating the initial supply of remdesivir if the drug proves safe and effective, which is enough to treat 140,000 patients. Its shares trade at 12 times 2019 adjusted earnings—already on the rich side for a large biotech company. That is good news for humanity. Investors shouldn’t confuse that with good news for Wall Street.
As always... do your own diligence when dealing with the market... especially during these times...