There are two options Gilead Sciences (NASDAQ: GILD) and Abbott Laboratories (NYSE: ABT). Gilead is best known for its drug Remdesivir, which can help treat patients with COVID-19, while Abbott has played an important role in testing for the virus. Let’s take a closer look at these two companies to find out which is the better coronavirus stock to buy today.
Gilead: Remdesivir approval hasn’t ended its slump yet
Gilead’s stocks are down 10% year-to-date, well below the S & P 500Despite the 2%, the stock rose in July after an analysis of the positive test results. So too does great news on October 22nd when the U.S. Food and Drug Administration (FDA) approved remdesivir for the treatment of patients with COVID-19. If they are 12 years or older and need hospitalization, they can use the drug.
This is a major milestone as Remdesivir is the first drug the FDA approved for the treatment of COVID-19. Until recently, remdesivir was only used under an Emergency Authorization (EUA), which the FDA first issued in May. Under an EEA, the FDA can allow health authorities to use an undetected drug during a public health emergency such as COVID-19. However, the formal approval indicates that remdesivir passed the agency’s full review process.
Image source: Getty Images.
Despite the exciting news, Gilead’s shares continued to decline. While remdesivir has a good safety profile, questions remain about its effectiveness. A current report in the New England Journal of Medicine found that while remdesivir helped patients recover from COVID-19 faster than a placebo, the fatality rate after 15 days was still 6.7%, even for patients taking the drug. This compared to an 11.9% mortality rate using a placebo.
Remdesivir has been used to treat patients with COVID-19 for months, but it’s not helping as much as hoped. This is the likely reason many investors are no longer as optimistic about this stock as they used to be. When the FDA granted remdesivir an EUA on May 1, there was still a lot of optimism about the stock, and it was trading at nearly $ 80 per share. However, in late October it closed at just $ 58.15.
On October 28th, the California-based company released its earnings for the third quarter that ended September 30th. Sales of $ 6.6 billion were 17% higher than the prior-year period, in large part due to the sale of Remdesivir. Without these values, the company’s product sales only increased 2% over the previous year. Overall growth for the segment was 18% including the drug COVID-19.
These have been good results for Gilead, but they may not be sustainable – not with vaccines on the way and more treatment options like that Regeneron Antibody cocktail (REGN-COV-2) that President Donald Trump took in October. Modern and Pfizer Phase 3 trial results for its COVID-19 vaccine candidates may also be released this month.
While remdesivir has bolstered Gilead’s numbers lately, this could prove to be a short-term trend.
Abbott: Lower sales growth, but demand for testing continues
Another option to consider is Abbott, which is becoming a big name in COVID-19 testing. As of August 14, the company announced it had shipped 7 million ID NOW rapid tests, 6 million molecular laboratory tests, and 13 million antibody tests related to COVID-19. And that doesn’t include the numbers from BinaxNOW, a new antigen test that received an EUA from the FDA on Aug. 26. It costs just $ 5 and delivers results in 15 minutes. Then, on October 12, the FDA also issued an EUA for Abbott’s AdviseDx serology test, which can be used to determine if someone has recently been infected with COVID-19.
On October 21, the Illinois-based company released its results for the third quarter of 2020, which ended September 30. It achieved global sales of $ 8.9 billion, a year-over-year growth of 9.6%. Unsurprisingly, the primary driver of the growth was a surge in the Test and Diagnostics segment, which posted revenue growth of 38.2% year over year and generated quarterly revenue of $ 2.6 billion. In the past nine months, the company’s total revenue has only increased 1.3%. That number would be much worse if diagnostics sales didn’t increase more than 14% during that time.
The company is optimistic that even if there is a vaccine, the demand for testing will continue to be high in 2021, especially when it comes to testing antibodies and determining if someone has been previously infected with the novel coronavirus.
Abbott has updated its guidance for 2020. Management now expects diluted earnings from continuing operations of $ 2.35 per share or better. That’s more than the $ 2 forecast in the previous quarter.
Which is the better overall purchase today?
Here’s a quick rundown of how these two health stocks performed this year:
GILD data from YCharts.
Abbott’s stocks have outperformed Gileads so far, and that trend is set to continue as demand for treatments like remdesivir is inevitable as soon as vaccines become available. However, as long as the pandemic continues, tests will be needed to ensure people can return to work and other activities can return to normal.
Even if a vaccine is available, there is no guarantee that anyone who receives it will be protected or that it will remain effective against the virus indefinitely. That’s why Abbott’s rapid tests continue to be in high demand.
Given the uninspiring results of remdesivir, there is little reason to be optimistic that after months of use, healthcare providers are suddenly finding a way to make treating patients more effective. Without strong incentives to use remdesivir, demand for the drug could stall as other options become available and five days of remdesivir treatment will cost many patients more than $ 3,000.
Abbott is the most likely company to continue generating strong sales in the face of the pandemic. That makes it the better coronavirus inventory to buy today.
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