With the number of confirmed COVID-19 cases rising despite worldwide lockdowns and social distancing efforts, the biotech industry is taking action. In just two months since the first infection was reported in the U.S., the country’s total number of cases has surpassed both that of Italy and China, and the Trump administration is calling on names in the space to step in. The sector’s response? Challenge accepted.
As the U.S. government pumped $8.3 billion into research as well as prevention efforts, several biotech companies have joined the fight against COVID-19. Among those battling the virus, one of TipRanks’ top five rated investing firms, Oppenheimer, recently highlighted two biotech heavyweights that have made notable strides in developing COVID-19 drugs.
Bearing this in mind, we used TipRanks’ database to learn more about Oppenheimer’s picks. It turns out that each Buy-rated ticker has also received substantial support from other Wall Street analysts. Here’s the full rundown.
Gilead Sciences (GILD)
First up we have healthcare giant Gilead Sciences. After hosting key opinion leaders (KOLs), Dr. Mitchell Weinstein and Dr. Kashif Memon, Oppenheimer has come away more confident in the company’s long-term growth prospects.
Weighing in on GILD for the firm, analyst Hartaj Singh points out that both of the KOLs believe “the first obstacle to overcome is the lack of rapid diagnostics, followed by a paucity of treatment options and lastly vaccines to prevent future outbreaks.” Additionally, the analyst argues that while current off-label treatments for COVID-19 such as chloroquine/hydroxychloroquine appear to be effective and well-tolerated, there is very little clinical evidence when it comes to this combination. As a result, the KOLs are open to all possible treatment options.
Enter Gilead. The biotech name’s remdesivir (IV) drug was originally developed as an antiviral against Ebola, but is now being evaluated as a possible COVID-19 treatment. Even though it will be challenging to gear the therapy towards COVID-19, its mechanism of action (MOA) is promising, with the analyst eagerly awaiting Ebola NHP data and the data readout from the Phase 3 studies for mild/moderate and severe COVID-19 patients.
It should also be noted that the KOLs stated statistical significance in the Phase 3 trials isn’t necessarily required to support the drug’s approval. “If neither Phase 3 trial hit statistical significance on primary measures, our KOLs indicated they would like to see improvements in various secondary measures and perhaps a trend improvement in the primary measure. Coupled with a benign safety profile, our KOLs still see a place for remdesivir in the current bare treatment armamentarium,” Singh explained.
On top of this, GILD shifted remdesivir to an expanded access program. “We believe that the company's explanation is in line with Good Clinical Practice guidelines which recommend robust data collection and structured datasets, which one-off compassionate usage does not allow. We also believe GILD continues its manufacturing campaign for remdesivir (IV, lyophilized) and that 3-6 months should be enough to get to commercial scale manufacturing (from current clinical scale),” Singh commented.
To this end, the Oppenheimer analyst stayed with the bulls. Along with his Outperform rating, Singh left the $80 price target as is, implying 10% upside potential. (To watch Singh’s track record, click here)
Looking at the consensus breakdown, 10 Buys, 8 Holds and a single Sell add up to a Moderate Buy consensus rating. At $77.67, the average price target indicates modest upside potential of 7%. (See Gilead stock analysis on TipRanks)
Regeneron Pharmaceuticals (REGN)
As for Oppenheimer’s second pick, biotech colossus Regeneron has earned significant praise from the firm for its drug’s ability to be used as a possible defense against COVID-19. Notching a 19% year-to-date gain, the rest of the Street is also keeping an eye on REGN.
Singh, who covers Gilead as well, highlights the potential of its anti-IL-6 agent Kevzara, which came as part of a collaboration with Sanofi, to be used as a last line COVID-19 treatment. The drug could reduce levels of IL-6, which are connected to higher mortality rates in pneumonia patients. This is encouraging as pneumonia symptoms are similar to the lung complications that occur in some severe COVID-19 patients. Sanofi and Regeneron are already initiating a Phase 2/3 trial evaluating Kevzara, and the implications could be monumental.
If successful in clinical trials, the therapy could be used in about 15% patients. “Treatments such as anti-IL-6 agents (REGN/Sanofi's Kevzara and Roche's Actemra), could be a last line of therapy given that both are very powerful immunodulatory drugs, expensive and have non-trivial side effects themselves. Anti-IL-6 drugs might be prescribed to the sickest patients; experiencing multiple organ failure or acute respiratory disease syndrome (ARDS),” Singh noted. As a result, Singh kept an Outperform call and $525 price target on the stock.
Meanwhile, Canaccord Genuity analyst John Newman notes that REGN is working on a two-antibody cocktail as a weapon against COVID-19, with initial clinical testing slated to start this summer. As Regeneron was able to successfully design a therapy for Ebola (REGN-EB3) that features the same technology, the future looks even brighter for the biotech, in the five-star analyst’s opinion.
It also doesn’t hurt that its Dupixent, Libtayo and EYLEA products for patients with diabetes could drive some serious upside. In line with his optimistic take, Newman maintained a Buy recommendation and $550 price target. Should the target be met, a 22% twelve-month gain could be in the cards. (To watch Newman’s track record, click here)
What does the rest of the Street have to say? Out of 15 analysts that have published a recent review, 9 rate the biotech as a Buy and 6 as a Hold, making the Street consensus a Moderate Buy. The $465 average price target brings the upside potential to 3%. (See Regeneron stock analysis on TipRanks)