Coronavirus/drugs: speculative cures
Developing new treatments is costly. Regulators’ expectations are high, as are those of investors
A race for a coronavirus cure is on, and not wholly for altruistic reasons. Investors too want to find the maker of any treatment that can solve the crisis. So far the most promising treatment is remdesivir from Gilead Science. Clinical trials of the US drugmaker’s antiviral drug have been under way. But Gilead is not alone. Inflated expectations, including on China’s local markets, for some drugmakers do not reflect the experimental nature of any hopeful treatment.
Remdesivir was originally developed as an Ebola treatment. Other groups want to jump on Gilead’s coattails. Last month, Chinese biotech company BrightGene claimed it could manufacture remdesivir in large quantities. Its share price had more than doubled in the year to mid-February.
That rally was shortlived. The Shanghai Stock Exchange reprimanded BrightGene on Monday saying it did not have approval from drug regulators nor license to produce from patent owner Gilead. BrightGene’s stock plummeted nearly 15 per cent. The company has only sketchy analyst coverage. This underlines the risks investors in biotech companies face. Developing new treatments is costly. Regulators’ expectations are high, as are those of investors.
For Gilead remdesivir will hardly be a blockbuster. The drug, if successful in getting to market, will add less than $2.5bn in one-time revenue, says Bank of America. Its group revenues were $22.4bn last year. That helps explain why shares of Gilead, which have rallied since January, have fallen over 7 per cent since last week. China’s Zhejiang Hisun Pharmaceutical which has received approval to go ahead with clinical trials for its flu drug to treat coronavirus symptoms. Shares are up by nearly a third over the past month.
For most biotechs, success will be elusive. One winner will take most of the market. A best-case scenario is being priced in. Getting closer to a cure is good news for patients. For investors, the gamble does not bear out the risks.