Sick Economics

Searching For Healthy Profits In The Stock Market



Biotech companies are at the forefront of the financial markets–they are among a select number of firms positioned to experience great profits as a result of the coronavirus. With several working to create and effectively produce treatments, testing devices, and ultimately, a vaccine, there seems to be a large influx of money being poured into this sector. There are two popular indicators that track how well biotech stocks are fairing–the SPDR S&P Biotech ETF and the iShares Nasdaq ETF (IBB). It is useful to evaluate these two tracking tools in conjunction with market standards such as the S&P 500. For example, the S&P 500 has experienced a 5.8% decline this year, while the IBB has experienced a 12% increase. Below are 3 biotech companies that seem to be uniquely positioned to turn a great profit as a result of the pandemic.

By Juliet Duguid, Biotech Analyst 


Gilead Sciences ($GILD) 

Gilead Sciences is an American pharmaceutical company located in Foster City, California. Primarily, the company deals with the development of antiviral drugs for the treatment of HIV, hepatitis B, and hepatitis C. Recently, the company came to national attention because it is on track to make a profit with the advent of its therapeutic COVID-19 drug, remdesivir. Remdesivir is a nucleotide analog with broad spectrum antiviral activity, tested both in vitro and in vivo in animals against a myriad of viral pathogens. As a result of this development, the stock price has surged upwards by 17.5%, while the S&P 500 only went up 2% in the same time frame. Although the FDA hasn’t approved the drug, due to the extenuating circumstances, the FDA has issued an Emergency Use Authorization, or an EUA, to expedite its ability to reach consumers that need it the most. In mid-June, the company began enrollment for a single arm, open label, phase II/III clinical trial that will evaluate the safety and efficacy of the drug in treating Covid-19 within the pediatric patient population, which is part of their ultimate goal to continue to conduct research on the drug to make it as useful as possible for hospitalized patients globally. 

According to a press release, the US Department of Health and Human Services has secured more than 500,000 courses of the drug for hospitals all over America. This would last through September, totaling around $1.9 billion in remdesivir sales for the company for the year. Analyst Geoffrey Porges at SVB Leerink estimates that the drug will be priced at $5000 a course in the United States, $4000 a course in Europe, and $2000 a course in other areas of the world. Although skeptical at first, Porges changed his rating on the drug from ‘market perform’ to ‘outperform’, and believes that the drug’s sales could total $7.7 billion by 2022. According to Gilead’s first quarter Earnings Press Release, the company’s total sales this year were $5.5 billion, up from $5.2 billion in the same period 2019. There was an estimated increase of $200 million due to “increased customer buying patterns and patient prescription trends, primarily in the United States, due to the coronavirus disease (COVID-19) pandemic”. Ultimately, as the coronavirus continues to affect the population, Gilead will continue to profit off it.


Roche ($RHHBY)

Roche is a multinational healthcare company based in Switzerland. Its worldwide operations encompass two divisions–Pharmaceuticals and Diagnostics. Roche has been working on developing a Covid-19 antibody test, which, according to the company, was granted Emergency Use Authorization status by the FDA in early May. The test, named Elecsys Anti-SARS-CoV-2, is an immunoassay for in-vitro detection of SARS-CoV-2 antibodies. The serology test has a 99.8% specificity and 100% sensitivity, which are both vitally important to ensure that there is no cross reactivity with other, similar forms of coronavirus. Although it has not been proven whether or not the presence of antibodies in one’s body necessarily corresponds with immunity, this level of accuracy is important for determining the exact number of people who have been exposed to the virus so proper measures can be taken to mitigate its spread within the population. 

In addition to this, Roche received Emergency Use Authorization status for their diagnostic test, which has the primary purpose of creating expedited medical testing to meet the urgent need for more proficient technologies. The cobas SARS-CoV-2 test was designed to qualitatively detect the presence of the virus via nasopharyngeal and oropharyngeal swab samples, especially on those who meet clinical and/or epidemiological criteria for Covid-19 testing. In addition to the diagnostic tool, Roche also released the cobas 6800 and 8000 systems, which enable hospitals and laboratories to run tests and get results on the spot. The test is also available in areas and regions that accept the CE Marking (mainly European nations), enabling these tools to reach a larger population, which is crucial at a time like this. CEO of Roche Diagnostics Thomas Schinecker said “Providing quality, high-volume testing capabilities will allow us to respond effectively…CE Mark certification and the FDA’s granting of EUA supports our commitment to to give more patients access to more reliable diagnostics which are crucial to combat this serious disease”. 

sickeconomics biotech book amazonIn late March, Roche was investigating its rheumatoid arthritis drug Actemra, an IL-6 inhibitor for the treatment of pneumonia in patients with Covid-19. The test allegedly showed evidence that the drug did not make a difference in the condition of patients with severe pneumonia. According to an Italian study, “The study showed no benefit in treated patients neither in terms of aggravation…nor in terms of survival”. However, Roche went ahead and continued with the phase III trial of the drug, partnering with Gilead Sciences to evaluate the drug’s efficacy in conjunction with remdesivir.  Results of these studies are pending, but look promising. 

Roche appears to have one of the fastest growing research and development budgets in the industry–their expenditures went from 8.073 million Swiss francs (roughly $8.58 million dollars) to 11.696 million Swiss francs (roughly $12.43 million). This is one of the most important indicators of a company’s profitability–the more they invest in developing new drugs, therapies, and technologies, the more likely they are to continue to be profitable as a result of the increase in innovation. Furthermore, Roche shareholders are paid a dividend of 2.6%, and although this number hasn’t seen too much of an increase in recent years, if still quite a large dividend nonetheless. 


Abbott Laboratories  ($ABT) 

It is a hardly disputed fact that testing devices, at their current level of production, are inadequate and unsustainable in the long run. Headquartered in Abbott Park, Illinois, Abbott Laboratories seems to be tackling this issue head on. The multinational healthcare company focuses on the discovery, development, and production of a wide variety of medical devices. As far as their coronavirus ventures, the company recently received Emergency Use Authorization status from the FDA for Alinity m, a fully integrated and automated molecular lab test for the detection of Covid-19. Alinity m previously received official FDA approval for Abbott’s HCV assay in March. The aim of the device is to allow laboratories to run through more tests in less amounts of time, thus improving efficiency–in fact, Alinity m allows 1080 tests to be processed in the span of 24 hours. Current laboratory testing procedures operate at much slower levels, and especially at a time like this, speed and flexibility are as crucial as ever.

Abbott Laboratories has also been working on the development of antibody tests, just like Roche. In late April, it released a serology test, a chemiluminescent microparticle immunoassay  intended for the qualitative detection of the IgG antibody in patients who have had SARS-CoV-2. According to an independent study conducted by the University of Washington School of Medicine, “SARS-CoV-2 IgG lab-based serology blood test had 99.9% specificity and 100% sensitivity for detecting the IgG antibody in patients 17 days or more after symptoms began”. These are very promising results, and it seems the company is positioned to profit from the exceptionally large specificity of the test.

In addition to increasing efficiency across laboratories, Abbott Laboratories is experimenting with point of care testing, which is testing done as near to the patient as possible (eliminating the need to send samples to a laboratory and having to wait prolonged periods of time for a result). Abbott’s ID NOW test is a portable, reliable testing device that can give you results within 12 minutes or less. Tests that have the ability to give results to patients rapidly will be vitally important to identify the virus in patients at the earliest possible stages, and slow down the spread of the virus considerably. As of July 1st, ID NOW has been shipped to physicians’ offices and urgent care clinics in all 50 states. In early May, however, there was controversy surrounding this testing method–allegedly, an NYU study had found that the tests were way less accurate than the company claimed, but after Abbott contacted the researchers, NYU admitted to the possibility of there being limitations in the study design. Still, this controversy took a slight toll on the stock price, but this minor setback must ultimately be taken in context–the company has 5 other coronavirus related devices in the works. The stock also offers a 1.6% dividend, which they have been raising for 48 consecutive years. 


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