The Dow soared more than 600 points, or 2.6%, on hopes of progress in the health crisis that has killed more than 50,000 people and crushed the American economy.
Speaking at the White House, Fauci said a National Institute of Allergy and Infectious Diseases’ (NIAID) study showed remdesivir had a “clear-cut, significant, positive effect in diminishing the time to recovery” from coronavirus.
“What it has has proven is that a drug can block this virus,” Fauci told reporters from the White House.
Investors cheered the news because there are currently no treatments approved by the FDA for treating coronavirus. The Dow climbed 600 points, or 2.6%. The Nasdaq surged 3.5%. Gilead rose 4% on Wednesday and is now up 27% year-to-date.
Scott Gottlieb, former FDA commissioner, told CNN Business the Gilead treatment is an “important start” in the fight against coronavirus.
“This drug doesn’t appear to be a home run, but it may benefit some patients when used properly,” Gottlieb said in an email. “We will get better drugs but this is a beginning of our ability to start to more effectively target this virus.”
No control group
Importantly, Gilead said “no new safety signals were identified” in either treatment group. The company plans to submit the full data for publication in the coming weeks.
However, it’s crucial to note that unlike the NIAID study, the Gilead-run trial does not have a control group, where some patients don’t get the drug being tested. That means it will be difficult to say whether the treatment is truly helping, or if patients could have gotten better on their own.
That’s partially because remidesvir is a potential treatment, not a vaccine that could prevent the disease from infecting people in the first place.
“Hopefully we’ll get more good news from Gilead and other drug companies on therapeutics that could increase the confidence of people to reengage with businesses again,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote in a note to clients.
Will remdesivir get FDA approval?
“My confidence went up today. It’s slowly been going up [with each sign] that this drug really works,” said SunTrust analyst Robyn Karnauskas.
Gottlieb, the former FDA commissioner, added that he believes there is enough data for the FDA to make the drug more widely available under an emergency use authorization.
Given the current crisis, Karnauskas agreed that the FDA could be more open to approving remdesivir for emergency use even though all data is not yet available.
“I don’t think the normal rules apply during a pandemic,” said Karnauskas. “[But] the FDA has to feel comfortable the drug is safe.”
Drug might not move the needle for Gilead
Even if remdesivir is proven effective against coronvirus, there is no guarantee it will be a big moneymaker for Gilead. That’s partially because there are many unknowns, including how long the pandemic will last, when the drug will get approved and what it will cost — if anything.
“We have no idea about any of these things,” Karnauskas said.
Still, SunTrust ran an analysis assuming remdesivir is the only treatment and is used to treat 250,000 patients a year, costing $10,000 for a 10-day treatment. Even then, SunTrust said Gilead’s fair value will only be $82 a share — or roughly where the stock trades now.
“The stock could overshoot its mark because there is excitement,” Karnauskas said.