Pfizer‘s (NYSE: PFE) surprisingly strong initial Covid-19 vaccine efficacy data that came out last week probably marks the beginning of the end of the Covid-19 pandemic. While this is very positive for the economy and the broader stock market, what does it mean for companies that sell or are developing treatments for Covid-19? Not much, actually. For perspective, our indicative theme of Covid-19 Treatment Stocks – which includes Eli Lilly (NYSE: LLY), Regeneron (NASDAQ:REGN), Gilead (NASDAQ:GILD), among others – remained largely flat over the last week, declining by just about -1%. Why is this?
To begin with, most of these companies derive a bulk of their revenue from other established products and the markets likely weren’t assigning a big value to the Coronavirus treatments, in the first place, given the nebulous long-term demand. Also, many of the Coronavirus treatments are drugs that were initially developed for other diseases meaning that development-related costs likely aren’t high. Secondly, the Revenue growth of many pharma companies is being weighed down by Covid-19, which has reduced doctors’ visits and delayed patients from seeking care. The development of a vaccine could end the pandemic and help to revive demand for other pharmaceutical products. Thirdly, with Covid-19 cases surging in the U.S., demand for treatments is likely to remain strong through the winter and possibly until the vaccine is administered at scale – a process that could take at least a year or two.
[Updated 9/10/2020]
Our indicative theme on Covid-19 Treatment Stocks – which includes biotech and pharma companies selling or developing treatments for the novel Coronavirus – is up by 16% year-to-date, compared to the S&P 500 which is up about 4%. While the long-term demand for Covid-19 treatments is not clear, considering the progress being made on the vaccine front, demand for therapies should rise over the next few months, as Covid infections are expected to increase over the winter. Regeneron Pharmaceuticals (REGN), up 58% year to date, is the biggest driver of the themes return, while Gilead Sciences (GILD) has been a laggard, down -1.5% year-to-date. Below is a bit more about the companies and how they have fared this year.
Regeneron Pharmaceuticals (REGN) recently indicated that its experimental Covid-19 treatment that involves a cocktail of two antibodies was effective in reducing viral loads and improving symptoms in non-hospitalized Covid-19 patients. The drug was administered to President Donald Trump, who tested Covid-positive last week. The stock is up 58% year-to-date.
Eli Lilly and Company (LLY) is developing multiple potential neutralizing antibodies to prevent or treat the novel Coronavirus. The company is also working with Amgen to manufacture and boost supplies of the potential treatments. The company is seeking emergency use authorization from the FDA for its LY-CoV555 antibody. The stock is up 14% this year.
Gilead Sciences’ (GILD) wide-spectrum anti-viral drug Remdesivir, which was initially developed for Ebola, has received emergency authorization from the FDA for use in hospitalized patients and patients with moderate symptoms. However, the stock is down by about -1.5% year to date, as gains from Covid-19 treatments were likely offset by the rejection of its Rheumatoid Arthritis drug.
Incyte (INCY) is leveraging some of its existing drugs for Covid-19 treatment, including the arthritis drug baricitinib which it co-developed with Eli Lilly. The company is also working with Novartis on using a blood and bone marrow cancer medicine called ruxolitinib in Covid patients. The stock is up by roughly 4%.
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