As the markets wheeze in Friday's trading on news that President Trump and the First Lady have tested positive for Covid-19, it brings up a question: why are the global stock markets so focused on finding a cure for Covid-19 -- in the form of a vaccine -- instead of a treatment? People are going to contract SARS-CoV-2, and they continue to do so rapidly. As of this writing, planet Earth has crossed the 34 million cases threshold. With India rapidly gaining on the U.S. and likely to exceed our case total by the end of next week, shouldn't we, as a society be more focused on the one million folks that have died from this super-flu than the >95% plus that have had it (with or without symptoms) and processed it as we, as a planet, move towards herd immunity?
I will leave that question hanging, but I am a stock guy, not a science guy, so let's look at the investment angle here. Stocks of companies that have Covid-19 vaccine candidates have boomed (Moderna (MRNA) is now worth $29 billion despite having almost zero revenues) while those in the treatment space have not. The frequency and magnitude of insider selling at Moderna is something that I have rarely seen in my 28 years as a stock analyst and, frankly, it's gross. Why would anyone want to be on the other side of that and buy what Moderna insiders are selling?
It's simple. Because mRNA technology offers the prospect of teaching the body how to fight off infections itself, and thus turn the human body into a drug-producing machine. It's a powerful concept, but is really only in infant stages. As I have mentioned in prior RM columns, I own Arcturus Therapeutics (ARCT) (which has a Covid-19 vaccine candidate currently in stage 1-2 testing at Duke-NUS hospital in Singapore) but as a professional portfolio manager I can't afford for my clients' portfolios to be composed solely of longshots.
So, I will pass on Moderna and the even-less-robust-from-a-corporate-standpoint names like CureVac (CVAC) and look for treatment stocks. Here in the U.S. all roads (and Google searches) lead to Gilead (GILD) as a Covid-19 treatment play via its antiviral drug, remdesivir. If Mr. Market is never wrong, then he is telling us that either a) remdesivir is not an appropriate treatment or b) these vaccines (using mRNA or traditional technologies) will be approved in short order and there won't be a need for treatments like remdesivir.
That's a mutli-faceted bet and I like to invest in cases where I can reduce the outcome matrix to one variable. In any case, GILD has been a flat-out dog in the past three months. It's down slightly today, down more than 25% since the all-time high of $86 per share reached at the beginning of May, and is trading almost exactly at its level of one year ago when so many other names with an "Rx" attached to them have gone completely bananas.
This is where an investor has to be VERY careful, and I have to insert the disclaimer "I am not a scientist." Gilead announced yesterday that it would take over distribution of remdesivir (branded as Veklury) as its distribution agreement with the U.S government has expired. AmerisourceBergen (ABC) will aid Gilead in distributing Veklury directly to hospitals.
As stated in the documentation included at remdesir.com.
- VEKLURY is an investigational drug that has not been approved by the FDA for any use. It is not yet known if VEKLURY is safe and effective for the treatment of Covid-19.
- The distribution of VEKLURY has been authorized only for the treatment of hospitalized patients with Covid-19. This use is authorized only for the duration of the declaration that circumstances exist justifying the authorization of the emergency use, unless the authorization is terminated or revoked sooner.
- The FDA issued this EUA, requested by Gilead Sciences and based on their submitted data.
Oh, man. Why didn't I pay more attention in science classes as a kid? Remember, though, Veklury is in Phase 3 trials in the U.S. It has NOT been approved and is only being prescribed currently under the aegis of the FDA's Emergency Use Authorization.
The market has shown us that Gilead stock was waaaay ahead of itself in May, and I believe history is going to repeat with Moderna. Don't be a guinea pig with healthcare stocks. Stick to companies with established -- approved -- drugs and the cash flows that accrue from them and you will sleep better at night.
