Gilead generates street skepticism ahead of Covid-19 results

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(Bloomberg) –

The results of a study on the investigational drug Covid-19 from Gilead Sciences Inc. are a priority for Wall Street, as cases exceed 1.35 million and deaths are approaching 76,000.

With a potential vaccine in more than a year, Gilead’s antiviral remdesivir offers one of the closest hopes for a treatment for the pandemic that is spreading worldwide and affecting many countries, including most of the states. United, locked out. Results from China’s advanced studies are expected this month and results from the US trials will follow in May.

After the company’s valuation jumped more than $ 20 billion from late January to early March, some Wall Street analysts warn that there may not be much room left for stocks to gain. The stock has moved sideways since hitting a two-year high on March 6.

“We see a very biased risk / reward,” warned analysts at Barclays led by Carter Gould before the April data. They consider Gilead underweight.

Barclays attributes a 20% chance that the two studies in China – one in patients with mild to moderate symptoms and another in critically ill people – will succeed. Even if the pair reaches the bar, Gilead’s gains could lead to the liquidation of “the business realities that remdesivir faces,” analysts said. This could include a complex manufacturing process and the difficulty of pricing and selling a drug for a global pandemic.

Covid-19 patients in placebo-controlled studies are likely to be treated after the virus has already reached the height of its powers in the body, rather than before when a treatment could potentially be more effective, said Barclays. If the two studies fail, Gilead’s shares could fall back into the low $ 60 range they traded before the crisis.

Wall Street investors have struggled to position themselves before the data. Gilead emerged not only as the top long pick for investors in 2020, but also among the top short picks in a JPMorgan Chase & Co. buying survey. Option data suggests the stock could swing 17%. back and forth by May 1.

Bearish bets against Gilead peaked at $ 1.97 billion on March 19, according to data from financial analyst S3 Partners. The stock was ripe for a short squeeze two weeks ago, but that is no longer the case, Shor Ihor Dusaniwsky said on Monday. Gilead is still one of the top three short stories in the biotech sector with $ 1.77 billion, or 1.8% of its free float, shorted on Monday, he said.

Even the bulls have doubts about the data to come. Evercore ISI analyst Umer Raffat, who has a higher rating than the title, said he expects the study in critically ill patients “may disappoint”, although he stated that remdesivir could help those who received the drug early enough in their treatment. Optimism that Gilead has started increasing production because he knows the drug works is also unfounded, he said, noting that management has confirmed that he has not seen the results of the trials Chinese.

For antivirals, “this is NOT the overall result of the test,” said Raffat. “All that matters is being able to identify the time of post-infection until you can launch an antiviral and expect it to work. “

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