Surprise! Roche (OTCMKTS:RHHBY) may have just found a treatment for the novel coronavirus, and no one was expecting it. Roche stock is rallying Friday on the news.
Investors have likely noted that, unlike seemingly all of its peers, Roche has not poured time and money into finding a coronavirus vaccine. Instead, the company has pursued developing accurate test kits. It has received emergency-use authorization from the U.S. Food and Drug Administration for both a typical diagnostic test and an antibody test.
However, Roche is also pursuing a different avenue to treating the coronavirus. The pharmaceutical company initially began researching its Actemra, an anti-inflammatory drug, to see if it was effective in helping patients with Covid-19. Early results were nothing short of disappointing. So what exactly has Roche stock rallying on Friday while the rest of the market lags?
The background here is that very early on in the pandemic, researchers were desperate to repurpose existing drugs to offer some clinical benefit to coronavirus patients. Studies in China and France found that Actemra, which is traditionally used to treat coronavirus, helped keep patients off ventilators. However, it has been very hard to recreate those findings. Many experts concluded that the promising results from China and France were based on flawed studies.
Roche is changing that narrative on Friday, and investors are rewarding Roche stock. According to a company release, Actemra reduced the likelihood a trial participant would progress to mechanical ventilation or death by 44%. The company will now coordinate with U.S. and international regulators to determine the next steps.
But why does this all really matter?
Roche Stock Rallies on Actemra Trial Results
The first catalyst for the rally on Friday is certainly the surprise nature of the results. Many investors had likely given up on ever proving anti-inflammatory medications could effectively treat the coronavirus. Roche proving otherwise is a great reason for some share-price gains.
Importantly, this also puts Roche ahead of its rivals. Other pharmaceutical companies tried to recreate the early results with their competing drugs, such as trials from Sanofi (NYSE:SNY) and Regeneron (NASDAQ:REGN) with their Kevzara drug. If Roche can drive these trials forward and find favorable next steps with regulators, investors could continue to take the stock higher.
It is also important to analyze Friday’s news in the context of progress from vaccine makers. Just because the likes of AstraZeneca (NYSE:AZN) and Pfizer (NYSE:PFE) are getting closer to early approval does not mean treatments like Actemra would not be helpful.
As public health experts have recently highlighted, widespread vaccination will require a great deal of time and effort. In the interim, patients can benefit from medications like Actemra. Plus, we have seen a willingness from consumers and investors to celebrate any helpful drugs. Actemra and its peers offer a sense that the treatment process would not be that bad. Therefore, it may feel like a return to normal is safer — or closer — than before.
Keep an eye out for any regulatory news relating to Actemra. This could be big for Roche stock.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.