The world may have just scored its biggest breakthrough yet in its fight against the novel coronavirus pandemic, and we have biotech giant Gilead (NASDAQ:GILD) to thank for the good news. The data isn’t fully public or vetted yet. But a sneak peek into clinical trial results indicates that Gilead may have stumbled upon a safe and effective treatment for Covid-19. GILD stock jumped more than 15% on the news.

Naturally, investors should have tons of questions here.

What exactly happened? Is this treatment scalable? Can it end the pandemic? What are the implications for the stock market? What about Gilead stock? 

Let’s answer all those questions by taking a deeper look at Gilead and its potential miracle treatment, remdesivir.

What Happened?

Back when the coronavirus first burst onto the scene in early 2020, rumors swirled about this potential miracle anti-viral treatment produced by Gilead called remdesivir.

Gilead came up with remdesivir long ago, to treat Ebola patients. It has shown effectiveness in treating Ebola, as well as in treating other coronavirus strains like SARS and MERS. As such, there was initially a wave of enthusiasm in February that remdesivir could help fight Covid-19.

That enthusiasm dampened in March as panic took over and the news flow on remdesivir went silent.

Until this week.

Long story short, Gilead is running remdesivir through Phase 3 clinical trials. One of those trials is happening at the University of Chicago Medicine. The doctors and disease specialists in charge of the University of Chicago study recorded a video discussing the results of their trials. That video was leaked to STAT News, who reported on it on Thursday, April 16.

The takeaway from the video? Remdesivir is working wonders.

The university’s study included 125 Covid-19 patients, 113 of whom were severe cases. Two died. Pretty much everyone else saw rapid recoveries in symptoms within a few days. Most patients — even the severe ones on ventilators and with 104 degree fevers — were healthy enough within six days of their first remdesivir dosage to be discharged from the hospital.

In other words, in this small study, remdesivir worked in treating coronavirus patients. 

Is the Coronavirus Pandemic Over?

To be clear, this is preliminary data. It’s not the full Phase 3 trial results for remdesivir. Those are due out in May. Until we get those, there’s no knowing for certain that this treatment does work effectively to treat Covid-19 in all situations.

Still, the data is highly encouraging, and the experts involved in the study didn’t say anything to rain on the parade.

Gilead simply said in a statement: “What we can say at this stage is that we look forward to data from ongoing studies becoming available.”

It’s quite likely that the full Phase 3 data announced in May confirms this “leaked” University of Chicago data. If so, then we could have an effective, safe, scalable and affordable treatment for Covid-19 on the market very soon.

That doesn’t necessarily mean the coronavirus pandemic is over. 

But, with the curve flattening essentially everywhere and now a potentially scalable treatment at our disposal, it does increasingly appear that the worst of this pandemic has already come and gone. 

Things should get better from here. 

What Happens Now?

As of this writing, the stock market is bouncing big on this breakthrough news. All three major averages are up more than 1% on the day. 

This rally comes on the heels of what has already been a huge rebound in stocks since late March. From its lows on March 20, the S&P 500 is now up more than 30%.

This rally makes sense. New cases are flattening out. The U.S. President and Governors are both considering re-opening the economy in May. The government and central bank have done more than enough to keep businesses afloat in the meantime. And there’s a potential treatment now.

When you put all of that together, it increasingly appears that the coronavirus pandemic and its economic aftershocks will be contained to 1-2 quarters. Economic normalization is on its way. Stocks will charge higher into the end of year. I maintain that the S&P 500 will close above 3,000 this year, based on estimated fiscal 2021 earnings per share of $170 and an 18-times forward earnings multiple. 

But it won’t be a smooth ride to 3,000. It’ll be choppy. Don’t expect a straight line rally. Instead, stocks will zig-zag their way higher. 

For investors, the implication is simple. Hold here. Don’t chase rallies. Just buy dips.

What About GILD Stock?

Then there’s GILD stock.

I’ve been pounding on the table about buying into the stock ever since the coronavirus pandemic first emerged in February. Since mid-February, Gilead is up more than 20%, including an 8% rally today on the STAT News report.

Is it worth chasing this rally?

No. Apply the broad market logic here. GILD stock will likely go higher into the end of the year, on strong Phase 3 data in May and potential widespread proliferation of remdesivir by summer. Economic normalization in the back-half of 2020 will help, too.

But it won’t be a straight line. There will be a lot of chop. Especially here and now, since Gilead stock is trading at a historically premium valuation of 12-times forward earnings, and because a lot of this rally is on non-rigorous trial data.

So don’t chase this rally. Let the stock cool down. Once it comes below $80 again, consider buying the dip.

The Bottom Line on Gilead

Although its preliminary, non-rigorous data, I’m cautiously optimistic that Gilead’s remdesivir is the silver bullet we’ve been looking for. I fully expect Phase 3 data in May to corroborate this preliminary leaked data, and for remdesivir to be in circulation as a fully effective treatment against Covid-19 by the summer.

I also expect the Covid-19 daily case curve to decline dramatically by then, and for the virus to hit near-zero transmission by June.

If so, then these two factors — coupled with a gradual re-opening of the economy — should help us put the coronavirus pandemic in the rear-view mirror sooner (rather than later), and propel sustained strength in the stock market.

As for GILD stock, wait for the high-flyer to come down. This is a great company. This is a great stock. But the valuation is rich here, and the hype is high. Let all that stuff pass before buying in (or buying more).