Why Is Coronavirus Helping Gilead’s Stock?

March 16th, 2020 by Trefis Team

Gilead’s (NASDAQ:GILD) stock has fared better than the broader markets through the current coronavirus and oil price war crisis, with the stock currently up by about 10% since early February, after the WHO declared a global health emergency. In comparison, the S&P 500 is down by about 16%. On the face of it, Gilead stands to benefit in this crisis, as it is viewed to have found a treatment for Covid-19, with its Remdesivir drug, which is currently under trials. Interestingly, even in the 2008-09 crisis, Gilead’s stock did not see any major decline, and it outperformed the broader markets by a wide margin. Below we discuss how the company’s stock reacted to the economic crisis of 2008 and compare its performance with the S&P 500. View our complete dashboard analysis on 2008 Crisis vs. 2020 Coronavirus Comparison: Gilead Sciences Stock Compared with S&P 500

Gilead’s revenues have been on a decline over the last few years, primarily due to its HCV (Hepatitis C Virus) drugs, which are trending lower amid increased competition from other drugs. In fact, HCV sales have declined by a whopping 7x from $14.8 billion in 2016 to $2.2 billion in 2019. The company’s bottom line also declined from $10.10 to $4.20 over the same period. Gilead’s stock price saw a sharp correction from around $120 levels in mid 2015 to $70 levels in mid 2017. Since then, the stock has remained in the range of $60 to $85.

If the company succeeds with its trial for Remdesivir for the treatment and a potential vaccination for Covid-19, it will likely be a major positive driver for the company’s stock. For perspective, the flu vaccination market alone is worth around $4 billion, and given the extent of Covid-19, the vaccination sales could be much larger in size. Some of the analysts have pegged over $6 billion sales for Remdesivir in the first year, if successful for the treatment of Covid-19. This would compare with the total $22 billion Gilead generated in 2019.

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Another pharma major, Johnson & Johnson (NYSE: JNJ), in collaboration with Beth Israel Deaconess Medical Center (BIDMC), is also developing a vaccine for Covid-19.

Gilead vs. S&P 50o Performance During 2020 Coronavirus/Oil Price War Crisis

  • Gilead’s stock was up by about 13% between February 1, and March 12, after the WHO declared a global health emergency.
  • The growth in GILD stock in a falling market can be attributed to speculations regarding its Remdesivir drug, which is being tested for the treatment of Covid-19, and if approved could be a major catalyst for the stock.
  • In comparison, the S&P 500 declined 25% over the same period. We also compare the current coronavirus crash to 4 other market crashes here.

Gilead Stock Vs. S&P 500 Performance Over 2007-08 Financial Crisis

  • GILD stock actually grew from levels of around $18 in October 2007 (the pre-crisis peak) to levels of around $22 in January 2008, before falling slightly to $20 levels in March 2009 (as the markets bottomed out) and stayed around the same mark in early 2010.
  • Through the crisis, GILD stock declined by 14% from its approximate peak. This marked a strong outperformance with the broader S&P, which fell by as much as 51%.

Conclusion

  • Gilead’s stock has fared better than the broader markets through the current coronavirus and oil price war crisis. While the current outperformance can be attributed to the potential treatment of coronavirus being developed by Gilead, going by trends seen during the 2008 slowdown, it’s likely that the stock will outperform the S&P 500, when the crisis winds down.

For more detailed charts and a timeline of the 2008 and 2020 crisis for different stocks, view our interactive dashboard analyses on coronavirus.

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