High-Performing Stocks Amid the Coronavirus Outbreak

Gilead Sciences, Moderna, 3M, Regeneron

Amidst the coronavirus surge and the recent stock market plummet, while stocks like Apple (APPL) and Tesla (TSLA) fall, certain Biotech companies’ stocks perform well. The companies that seem to benefit from the outbreak are Biotech and pharmaceutical companies focused on fighting the SARS-CoV-2, coronavirus by finding a cure. These companies are Gilead Sciences, Moderna, 3M, and Regeneron.

Gilead Sciences’ (NASDAQ: GILD) rose about 7% on Friday since the World Health Organization (WHO) announced that its drug may likely hold a cure to Covid-19. On the other hand, Regeneron Pharmaceuticals (NASDAQ: REGN) also experienced a significant increase of over 30% since its February 4 announcement of coming to an agreement with the U.S. Department of Health and Human Services (HHS) to develop a treatment for the Covid-19. Novavax increased 19.4% within the same period. While Moderna gained 60% since Friday market, after announcing that it had submitted the first set of Covid-19 vaccines for human trials.

All biotech and pharmaceutical companies that have shown interest in participating in the Covid-19 cure race have at least become $280 million richer as investors see the possibilities of yielding good profit at the end of the coronavirus phase. Not only are these companies richer by some million bucks, but they have also outperformed the market in spite of the recent stock market plunge.

Since the spread of the outbreak, the US stock market entered correction territory as the impact of the coronavirus on the market increased, thereby causing uncertainties. High performing stocks like Tesla (TSLA) dropped almost as quickly as they rose. Gilead Sciences, Novavax, and Moderna were among the leading stocks of last week despite the stock market plunge. The stocks of these companies respectively increased after an official of the World Health Organization (WHO) stated on Monday that its treatment was probably the “best shot” at treating the Covid-19. Same with Moderna after also announcing on Monday that it had submitted its first Covid-19 vaccines for human trials. Novavax also gained audience after announcing on Wednesday that it had begun animal testing of its vaccine.

Gilead Sciences

Percentage Increase: GILD +6.04 (8.71%)

Monday Closing Price: $75.40

Gilead Sciences is one of the leading biotech companies in the world in terms of market valuation, following closely after Amgen. The company is known for its development of treatment for major illnesses such as hepatitis, some types of cancer, and HIV.

A few years ago, the company’s bullish Hepatitis C drug lost about 23% of its market value after many Biotech companies also developed medications for Hepatitis C. As a result of that, Gilead’s income dropped by 10% to $1.30 per share. Since then, the company has put in much effort to create the perfect comeback and redeem its struggling stock. By this, the company is determined to develop HIV medications running against a large competitor, ViiV Healthcare which is majorly owned by GlaxoSmithKline (GSK). Its major source of income is the Yescarta, an important cancer drug which was acquired together with Kite Pharma. Notwithstanding, sales of the Yescarta drugs are also dropping and the company’s investors are seeking new treatment interests for Gilead such as treatments for liver diseases, inflammatory, and blood-related diseases. Little wonder why the company also has an interest in participating in developing a treatment for the Covid-19 which has caused its stock to increase by 7% since its announcement on Monday.

Gilead is not only determined to develop a treatment for the Covid-19 but has also recently announced its intention to acquire Forty Seven (FSTV), a cancer-focused biotech company that has an immune-oncology drug, at $4.9 billion.

Gilead, reportedly hit a 52-week high after the World Health Organization announced that its ‘Remdesivir’ had a good shot at curbing the coronavirus. Some analysts are skeptical about this development as it is no news that the economics involved in addressing epidemic and pandemic issues are relatively low and Gilead could possibly generate a one-time revenue of nearly $2.5 billion; hence, it wasn’t a deal to particularly dive at.

In pre-market trading, Gilead shares were marked 0.25% higher trading at $73.10 per share. Continuing at this rate, it is hoped that their six-month gain would extend to 18%.

3M

Percentage Increase: MMM +3.78 (2.53%)

Monday Closing Price: $153.02

This respirators and protective mask company, 3M (MMM), also greatly performed amid the recent stock market plunge. As the coronavirus pandemic continues to spread, the demand for face masks and respirators continues to increase. The demands have so increased that it is has become difficult to order on e-commerce platforms such as eBay, AliExpress, and Amazon. The large demand for respirators and face masks has so greatly caused the stock of 3M to surge amid falling stock prices.

In a statement, Nikki McCullough, global head of safety of 3M stated made mention of the fact that the world was “seeing outbreaks develop in new countries every day. But even the countries where there isn’t a widespread outbreak are working really hard to prepare right now, in case they do have that situation.” Preparations in terms of making necessary arrangements to curb the outbreak ahead of time, and peradventure it happens sooner than later, individuals would be able to protect themselves.

The high demand for the N95 respirator has caused M3 to ramp up production and its workforce in South Dakota working tirelessly to produce more face masks. In the US alone, 30 million N95 respirators have been purchased but it is nothing compared to the target 300 million respirators needed as the coronavirus outbreak threats continue to increase. Andy Rehder, 3M’s plant manager, stated that they “have the capacity to do that” while working round the clock moving from a “standard five-day to a seven-day week.” Still, experts doubt that 3M and other respirator manufacturers like Kimberly-Clark and Honeywell may not be able to meet the ever-increasing demands. Already, Texas-based Prestige Ameritech said that it had received it 100 million N95 respirators order from Hong Kong, Singapore, and Taiwan.

While companies focused on risk prevention continue to produce preventive materials, some experts have acknowledged the role protection gears like face masks and respirators play in the outbreak saga. Stating the possibilities of protective gear to slow down infection rates as Biotech companies and pharmaceuticals work on vaccines and treatments for the Covid-19. According to the CDC, the N95 respirators are able to filter 95% of airborne particles including viruses and bacteria compared to common or surgical face masks that do not effectively filter out air particles.

3M’s stock had fallen by nearly 29% in the previous year, therefore, the coronavirus outbreak and numerous sales of its respirators present the company with another shot at getting back on track. Scott Davis, Melius research analysts recently upgraded his 3M shares equivalent to Buy from a long time Hold raising his price target to $205 from $191 which would result in a 38% increase. Though many investors are elated at this development, many analysts have not yet considered rating the company’s shares equivalent to Buy as the average buying-ratio for Dow Jones stocks is 55%.

3M’s stock may not look like “it” yet, however, Davis still believes in the potential of the business especially in this current time, stating that it has “most of what we look for at this point of the cycle… it’s a short cycle, now coming up on full five quarters of a recession and ninth quarter of weak results. We’ve had 5 meaningful negative earnings revisions… and a normal down cycle is four to six quarters.” In this case, the cycle is a short one, however, short-cycled products have high possibilities of boosting economic activities considering that they cost less and can be bought and sold multiple times until demand reduces. He also stated that “the simple reality is that 3M is one of only a handful of S&P names that sells a necessary product in virus containment.”

Part of the reasons why many analysts do not yet rate 3M’s stock “Buy” is the fear of PFAS liability issues that may come up. PFAS (per and polufluoroalkyl substances) are a group of chemicals that are detrimental to human health. From the late 1940s up until 2000, US manufacturers made use of those chemicals, and to date, the US is cleaning up production sites that made use of PFAS.

The US government is also committed to filing liability lawsuits against manufacturers that use PFAS. 3M fell victim of this as a $548 million lawsuit was filed against it with $235 million related to PFAS. As a result of this, John Inch, an analyst at Gordon Haskett rates 3M’s shares the equivalent of “Hold” with a price target of $151. Also expressing his concern over the “PFAS pickle” and the possibility of the company’s total liability amounting to $15 billion after-tax basis. Another analyst, Stephen Tusa of JP Morgan rates the shares equivalent to Hold with a price target of $150 for the shares.

Moderna

Percentage Increase: MRNA +3.95 (15.23%)

Monday Closing Price: $29.88

Moderna (MRNA), a Cambridge-based biotech experienced a stock surge within the past week after its Tuesday’s announcement stating that it was working on a new coronavirus vaccine, the MRNA-1237. The company later said that it had successfully shipped the first batch of treatment to the National Institute of Allergy and Infectious Diseases (NIAID) for further study by the National Institutes of Health. Following this was a $2.5 billion funding approval for vaccines, treatment, and protective gear by the White House.

As of Tuesday morning, Moderna shares were up by 17.3% to change hands at $21.80 per share. If it continues at this pace, analysts are optimistic that the stocks may extend to 50% in its six-month gain. Its shares also increased to about 19% in premarket trading after it had reportedly shipped the first batch of its coronavirus vaccine to the National Institute of Allergy and Infectious Diseases (NIAID) for testing.

The NIAID intends to run the first human tests by the end of April with about 20 to 25 healthy volunteers. There is no telling how long the testing would last as the SARS outbreak of 2002 lasted about 20 months before the NIAID got a vaccine in the first stage of human testing.

Regeneron Pharmaceuticals

Percentage Increase: REGN +20.18 (4.54%)

Monday Closing Price: $464.75

Participating in the race for developing treatments and vaccines for the coronavirus is Regeneron (REGN), a pharmaceutical company. Since its announcement to join the Department of Health and Human Services in the development of treatments for the epidemic, its stock gained 10% over the past week. Making it one of the few S&P 500 stocks that gained last week. Over the past two months, Regeneron’s stock was up 29% trading around $336 on January 30.

Unlike its competitors, Gilead and Moderna, Regeneron is yet to submit its coronavirus treatments for testing as it is still considering other compounds that could be adapted for the creation of treatments for coronavirus. Hala Mirza, Regeneron’s spokeswoman said that compounds for the treatment were still being developed and the process was still in its early days. She further added that the treatment may last a few months before they are sent for testing.

It was also reported that the company will use a “rapid response” technology named VelociSuite to develop an effective antibody candidate with hopes to curb the coronavirus.

Conclusion

Biotech and health care companies seem to be making waves in this period and their stocks have suffered less compared to other stocks in the stock market. Though the Nasdaq Biotechnology index dropped by 7.2% in the past week, it didn’t stop certain companies from surging. Many analysts have expressed concern and mix feelings about the performance of biotech stocks and they are not in a hurry to rate the above-discussed companies’ stocks equivalent to Buy for fear of future liabilities. This is related to the possibilities of biotech companies’ stocks making high gains during a pandemic. A few analysts beg to differ at the general thought of some biotech companies not necessarily being good investments. However, a fact still remains that shares are subject to steep declines especially among companies that have no fixed income-generating products.