Biotech share prices in this COVID-19 era and the rollercoaster impact of remdesivir

30/05/2020
Insights
Regina Gabitova

Although the exact numbers are yet to be known, the virus has claimed nearly 220,000 lives and infected more than 3 million people globally. The COVID-19 outbreak is proving every week to be more of an economic event than a sanitary one.

Numerous economic data releases from various countries every week are gloomy and prove that COVID-19 has a far-reaching effect on the global economy; and this is being reflected in the data. With the prospect of 30% unemployment in 2Q201, potential State insolvency and a massive GDP contraction in the US and globally, the economic impact is expected to be violent and reach epic proportions.

Many global indices have been reaching “an all-time low” or “falling the most on record” over the last few weeks. S&P 500 is down 9.1% year-to-date (YTD) mostly due to the actions of the Fed and fiscal stimulus (S&P 500 reached the bottom of -31.8% YTD on March 23rd)2; UK FTSE 100 is down 18.9% YTD; German Dax is down 16.2% YTD; Hong Kong Hang Seng index is down 12.6% YTD; European Manufacturing PMI is lower than levels reached in 2008; business and consumer confidence has been collapsing all around the globe.

Interestingly, the performance of the biotech industry is not an exception in the current climate and is likely to be negatively impacted in 1H2020 as the world is under lockdown, leading to supply-chain disruptions, delays in clinical trials and lack of demand for medical diagnostics and other treatments.

Having said that, the Nasdaq Biotech Index has outperformed both the S&P 500 and the medical sector on a YTD basis (up 4.9% 2020YTD). The pandemic has boosted the prospects of a few Nasdaq Biotech companies in hope of a possible treatment.

Nasdaq Biotech Companies with COVID-19 programs in the pipeline:

SOURCE: PUBLIC MARKET DATA AS OF CAPITAL IQ AS OF 29 APRIL 2020, NCT04292730NCT04292899NCT04315298NCT04327388NCT04283461NCT04336410

For example, on April 23rd, the Chinese trial showed remdesivir did not improve patients’ condition or reduce the pathogen’s presence in the bloodstream. The study involved 237 patients, giving the drug to 158 and comparing their progress with the remaining 79. The drug also showed significant side effects in some, which meant 18 patients were taken off it. This data was accidentally published by the World Health Organisation and reported by the Financial Times. As expected, global stock markets immediately reflected on this news:These individual stocks play a major role in global market performance due to the world dependence on availability of a potential vaccine or therapeutic to stop the outbreak.

SOURCE: PUBLIC MARKET DATA AS OF CAPITAL IQ

Gilead trading was briefly halted on the Nasdaq on April 23rd after the shares fell sharply on the news.

The story developed further on April 29th when Gilead reported some positive results in a US study of remdesivir. “We understand that the trial has met its primary endpoint and that NIAID (National Institutes of Allergy and Infectious Diseases) will provide detailed information at an upcoming briefing,” Gilead said.

“The company also released results from its own study, which appeared to show patients did just as well after a five-day course of the drug than after 10 days. However, this study did not have a control arm comparing patients on remdesivir to patients who were not taking it and is not peer-reviewed” – reported by the Financial Times (FT).

Shares in Gilead rallied 8% in pre-market trading in New York on April 29th after the company said it was aware of “positive data” from the study run by the US NIAID, as reported by the FT. The stocked closed 6% up on April 29th (1 Day trading).

Global stock rose on Wednesday, April 29th after the Gilead news was announced:

SOURCE: PUBLIC MARKET DATA AS OF CAPITAL IQ AND BLOOMBERG

We will continue monitoring these COVID-19 driven stocks going forward given the potential implications on global stock markets and M&A activity in the sector.

As European economies slowly reopen in May, it will be very interesting to get a better understanding of the real damage and see if COVID-19 has impacted buyer behaviour in any significant way.

SOURCE: 1 BLOOMBERG ECONOMICS; “U.S. JOBLESS RATE MAY SOAR TO 30%, FED’S BULLARD SAYS”; 2DATA PRE-US MARKET CLOSE AS OF APRIL 29TH, 2020. OTHER SOURCES: THE FINANCIAL TIMES; BLOOMBERG; NASDAQ.COM ARTICLES, REAL VISION WEEKLY UPDATES; EVALUATE PHARMA; CAPITAL IQ AS OF APRIL 29TH, 2020