7 stocks in a race to Covid medicine

2:08 PM May 20, 2020

Global economy has been devastated by the coronavirus pandemic and there’s a consensus that a return to normal will require effective and widely available treatment and vaccines. Little wonder investors are tracking stocks of companies working hard to deliver such products. In this analysis we present leading candidates in the field. 

What do you need to know first?

It is important to distinguish between coronavirus drug and coronavirus vaccine. The former is aimed at alleviating symptoms of Covid-19 and curing patients that contracted it while the latter is aimed at developing long-term immunity to the disease.

Before we look at particular companies and what they are developing, a warning is needed. Coronavirus pandemic caught the world off guard and the need to find treatment or vaccine is great. Because of that approval and trial rules were relaxed in some countries in order to speed up development. Having said that, it is hard to compare those announcements with similar news for non-coronavirus drugs. Early trials of many Covid-19 drugs and vaccines started before coronavirus became global pandemic and there were not as many patients infected worldwide as there are today. This means that those trials were often carried out on a limited sample or without a proper control group therefore evidence from those early trials should be viewed with caution. On the other hand, the winner of the race will reap major benefits so investors react even to traces of information. 

Coronavirus drugs - Gilead and Eli Lilly

Remdesivir manufactured by Gilead Science (GILD.US) is currently the most "famous" coronavirus drug. It has shown promising results in clinical trials and was hailed by US officials. While the fact that numerous health regulators around the world approved it for use in Covid-19 treatment may look like an achievement, some explanation is needed. It is not a new drug - it was used a few years ago in treating Ebola and because of that we know that it is safe to use. This is why it has got approved so quickly. Gilead moved into late-stage trials in late-February when pandemic was still in early stage and confirmed that it was not able to collect prespecified sample size. Nevertheless, Remdesivir is the only drug up to date that has shown significant effects (recovery time shortened from 15 to 11 days). As more patients are treated, investors can await more news on the efficiency of the product. 

Gilead benefited from rumours surrounding its drug and later jumped on actual trial results. However, long-term price zone ranging $85-89 turned out to be too tough to break. Stock has already erased more than a half of the upward move started in late-January 2020. Big support can be found at $62 but that is far off current market price. Source: xStation5

Several companies, including AstraZeneca (AZN.UK), Eli Lilly (LLY.US) and Regeneron Pharmaceuticals (REGN.US), try to develop an antibody treatment that could mimic the response of immune-system. Biotechs with promising candidates are currently boosting production in order to have enough of the drug for human trials. Eli Lilly seems to be among leaders as it plans to ask the US regulator for approval to start human trials by end-May. However, as most trials are expected to start around mid-year, we will likely have to wait a few months for results.

Eli Lilly (LLY.US) has not only fully recovered from coronavirus sell-off but also managed to paint a fresh all-time high at $165. The stock gave back some gains later on but after a correction it started to move in an upward channel. Price moved to a lower limit of the channel yesterday. Source: xStation5

Coronavirus vaccines

News that coronavirus vaccine developed by Moderna (MRNA.US) showed promising results in early trials sent stock markets higher at the beginning of this week. It is said that the vaccine created an immune-system response. However, what people do not realize is the fact that those early tests were not really aimed at proving effectiveness of the vaccine but its safety. Moderna wanted to test the vaccine on a small sample first to see whether its product is safe to inject and does not cause any side effects. As it proved that it is safe to inject, trials involving a bigger number of people will follow. Results of these next trials will be key as sample size will be big enough to determine whether the vaccine is actually effective against Covid-19. Second phase trials aimed at determining dosage are expected to begin any moment while large-scale 3rd phase trials are expected to start in July.

Investors seem to have second thoughts over vaccines from Moderna (MRNA.US). The stock launched the week with a huge bullish gap but has been moving lower since. Area around $67.50 acted as a resistance prior to trial result announcement and may act as a support should a pullback continue. Source: xStaiton5

There are also two other noteworthy vaccines being developed. Sanofi (SAN.FR) teamed up with GlaxoSmithKline (GSK.UK) while AstraZeneca (AZN.UK) partnered with Oxford University.

Sanofi and GSK try to develop a vaccine by altering the current flu vaccine developed by Sanofi. Two companies received funding from the US government and plan to launch trials on humans in the second half of the year. Current capacity allows to make 600 million doses of vaccine per year but Sanofi and GSK aim to double it. Executives said that the United States will have a priority to receive the vaccine, a comment that sparked outrage in France where Sanofi is domiciled.

AstraZeneca and Oxford University try to develop a vaccine by altering a harmless virus. The United Kingdom provided funding for the research and will have the right to receive the vaccine first. Vaccine is already being tested on humans and may reach late-stage trials by mid-2020. AstraZeneca aims to make up to 30 million doses available in the United Kingdom by September 2020.

AstraZeneca (AZN.UK) also recovered above pre-Covid levels. Shares has been trading near the upper limit of the channel all the way up and has entered into correction recently. First support to watch can be found at a lower limit of the Overbalance structure. Note that 23.6% retracement and lower limit of the channel can be found in the same area. Source: xStation5

The content of this report has been created by X-Trade Brokers Dom Maklerski S.A., with its registered office in Warsaw, at Ogrodowa 58, 00-876 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. X-Trade Brokers Dom Maklerski S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.

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