An analyst on March 18 wrote that Gilead’s (NASDAQ:GILD) remdesivir drug “could be approved” as a treatment for the coronavirus from China “very soon.” Separately, new, positive anecdotal information indicates that the drug will indeed be at least somewhat effective against the coronavirus.
Meanwhile, remdesivir could act as a prophylactic drug for a year or more until a vaccine is launched. The company recently also made a potentially important breakthrough involving an HIV drug.
Given all of these points, GILD stock looks attractive at its current levels.
Good News on Remdesivir for GILD Stock
The results of the clinical trials of remdesivir “are likely to be positive” and the treatment “could be approved for broad use in the coming months,” assuming the trials are successful, wrote Piper analyst Tyler Van Buren. The analyst believes that the drug is safe, and regulators will not be too strict about efficacy requirements for the drug, given the impact of the coronavirus pandemic.
Van Buren’s note comes after a report by The Wall Street Journal that, out of 14 critically ill coronavirus patients with an average age of 75, four received the drug beginning in late February. The report was based on statements by Rear Admiral Richard Childs, a specialist with the National Institute of Health. All four of the patients who received the drug, plus another three patients who received the treatment but were not among the original group of 14, had survived through Mar. 17. Of the 14 patients, seven have recovered.
Given the patients’ advanced age and the amount of time that passed since they were treated, as well as the high mortality rates of elderly people with coronavirus, that’s impressive.
Childs said there were indications of improvements after the drug was administered. According to The Journal, Childs said he “saw favorable changes in those who got the drug.” He added that “many of (the 14 patients” were probably going to die in a short amount of time” if they had not received the drug and other treatment.
Finally, he reported that patients who received the drug needed less support from ventilators.
As I noted in a previous column, remdesivir “which works by preventing viruses from reproducing, was found to prevent MERS, which is similar to the coronavirus, in monkeys…(and) has been shown to effectively ‘inhibit (coronavirus) infection in preliminary lab tests of human cells.”
The theory I advanced in the previous article about the drug potentially becoming a vaccine was incorrect because vaccines get the body to produce its own antibodies to combat disease. remdesivir doesn’t do that. What it might be able to do, however, is treat those people who might otherwise die from the illness before a vaccine is released 12-18 months from now.
And, particularly if the drug’s side effects prove to be fairly benign, it could be given to tens of millions of healthcare workers.
Further, even if a vaccine is developed, I believe that governments would look to stockpile remdesivir in case a different but related virus that the drug could also combat arises in the future. Given all of these points, I think that the drug could easily generate several billion dollars of revenue for the company in the next 12 to 18 months. That would be significant for GILD stock, whose total market capitalization is around $100 billion.
Gilead Has Other Positive Catalysts, and Wells Fargo Is Bullish
The drug maker has many other positive catalysts besides remdesivir. The company has the only two drugs approved by the FDA for preventing HIV infection: Truvada and Descovy.
Even though generic versions of Truvada will become available later this year, Descovy is arguably safer for some patients. That’s because, unlike Truvada, it does not appear to cause kidney problems. Further, Gilead is looking to get its HIV drugs into the Chinese market and, as I pointed out in my previous column, the company has multiple, advanced treatments for Diffuse large B-cell lymphoma, a form of non-Hodgkin’s lymphoma.
The company’s positive catalysts led Wells Fargo to raise its price target on Gilead stock to $87, well above the stock’s current price. The firm is upbeat on the company’s pipeline and its recent acquisition of Forty Seven (NASDAQ:FTSV), which owns one of the Diffuse large B-cell lymphoma treatments to which I referred earlier. It believes that remdesivir could boost the company’s stock price by $20.
The Bottom Line on GILD Stock
Remdesivir looks poised to meaningfully boost the company’s stock price, and Gilead has multiple other positive catalysts. Consequently, investors should buy the stock at its current levels.
As of this writing, Larry Ramer owned shares of Gilead stock. Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.