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Could Gilead Sciences Have a Cure?

02/12/2020 9:07 am EST


Joe Duarte

Editor, Joe Duarte In the Money Options

Is there a cure for the Coronavirus, perhaps, and it could shake up markets, writes Joe Duarte.

Is there a cure for the Coronavirus in the wings? And does biotech antiviral giant Gilead Sciences (GILD) have such a weapon in its drug arsenal? Yesterday, we teased this out in our weekly market analysis letter, here we go a bit deeper.

The good news is that Gilead, an $80 billion market cap diversified biotech company specializing in antiviral medications, may have a potential remedy for the Coronavirus available and that it is currently being tested in China.

This story is clearly developing and there are no guarantees of success. However, the Chinese government began to use Gilead’s failed Ebola drug, remdesivir, in clinical trials involving 761 patients on Feb. 6. The development came after Gilead reported improvement in symptoms within 24 hours in a U.S. patient in the state of Washington who received the medication. Any the markets are taking notice (see GILD chart below).


Moreover, both Gilead and the Chinese government are keeping any news close to their vests, although there have been rumors of great success with the medication during the trial.

Gilead is well positioned in viral treatments as it developed Harvoni and Sovaldi, the initial cures for Hepatitis C. It is also a leader in HIV treatments with a 79% market share in the United States while possessing a deep pipeline of current and next generation HIV drugs, which provides $16 billion per year in revenues. Therefore, if remdesivir makes a significant dent in the Coronavirus, it could give Gilead a potential franchise against similar viruses in the future, not to mention that it could save a lot of lives in the present.

The stock has been trading wildly over a protracted trading range the last few months but did deliver a chart breakout on Feb. 7 (see chart above) Certainly, buying GILD for its prospects against the Coronavirus is highly speculative, nevertheless, given the current alternatives for a break against the spreading pandemic GILD may not be a bad place to put a few bucks these days.
Here is a compelling summary of Gilead’s history:

  • Developed cure for Hepatitis C: Sovaldi and Harvoni
  • Excellent cash flow
  • Stout balance sheet
  • 4% dividend yield
  • Increasing footprint in Hepatitis B
  • Leader in market share for HIV drugs
  • Broad and diversified pipeline to include treatments for cancer and rheumatoid arthritis

Clearly this could be a make or break trade so the judicious use of stops and/or options to manage the risks involved is warranted.

I have an open long position in GILD as of this writing.

Joe Duarte is author of Trading Options for Dummies, and The Everything Guide to Investing in your 20s & 30s at Amazon. To receive Joe’s exclusive stock, option, and ETF recommendations, in your mailbox every week visit here. I’ll have more for subscribers in this week’s Portfolio Summary. For a 30-day Free trial subscription go here. For more direction on managing the GILD trade, go here.

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