Gilead’s Stock is up as its drug remdesivir is the only medicine approved for treatment of Covid-19, but it is also well-positioned to benefit from a world of recurring pandemics. This brings up the subject of trading biotechnology in the era of coronavirus. The Motley Fool writes about Gilead Sciences in their article about the best 3 stocks to buy in May.
Gilead’s stock is a strong buy for three core reasons. First, the biotech is poised to bring several new growth products to market in the near future. Headlining this group is experimental rheumatoid arthritis drug filgotinib, which has the potential to be a megablockbuster by the middle of the decade.
Second, the company has been slowly but surely building up its oncology franchise, which is key to its long-term outlook. During the first quarter of 2020, for instance, Gilead snapped up cancer specialist Forty Seven in a modest $4.9 billion deal, and it was rumored to have interest in two other small-cap oncology companies as well.
Third, Gilead sports an extremely strong balance sheet, free cash flow, and a top-notch shareholder rewards program.
This is their pitch for investing in Gilead both now and for the long term. Our view is that these folks are positioned to respond to further infectious Disease threats as the world’s population increases and social distancing becomes more and more difficult.
How Often Does a Pandemic Occur?
Although we do not think of it, the yearly infections by mutated flu viruses span the globe and are pandemics. We have “gotten used to” them but the “flu” routinely takes between 30,000 and 40,000 lives a year just in the USA. As a matter of perspective, fifty years ago flu mutations happened about every five years and spread worldwide. Today this happens every year. Thus vaccines need to be updated every spring but by the fall when millions of doses are ready there is always a new mutation.
We do not know if Covid-19 will mutate and come around again or not. However, the increasing world population makes such a scenario very possible and worrisome. The only protection aside from repeatedly shutting down the world economy will be having drugs and/or vaccines to fight these diseases. And, best hope for such remedies is in the biotech industry.
Investing in and Trading Biotech Stocks
The long term promise of biotech companies is that they will come up with treatments for major diseases like diabetes, cancer, and arthritis as well as infectious diseases. The problem for investors and traders is buying before the price of the stock goes up as the results drug trials begin to show promise. This happens every time a drug passes one of the levels of clinical trials designed to demonstrate safety and then efficacy in treating humans. Results of early trials can be misleading as noted by the insider joke among researchers that “mice tell lies and monkeys exaggerate.” In other words, early animal testing results may have little application to humans. And, there are drugs that do indeed cure a disease but have dangerous side effects that limit their use to patients with no other options for end stage disease.
Those trading biotech stocks in the coronavirus era will need to learn how the series of FDA tests work and at what level it is advisable to invest in search of big rewards.
