Europe is now ground zero for the coronavirus pandemic.
Italy is locked down, with 24,747 active cases and 1,809 deaths as of Monday.
And airplanes on their way to the Iberian Peninsula actually turned around in mid-flight as Spain announced its own national lockdown on Saturday.
Spain’s crackdown started last week when schools closed, confining 15 million students to their homes.
Supermarkets are reporting panic buying and shortages of staples like pasta, rice and toilet paper.
Economists predict the Spanish economy, which had been expected to grow by 1.7% this year, will plunge into recession.
Spaniards tried to lift their spirits by standing on balconies singing along to the national anthem. Similar displays of unity were seen in Italy.
We’re already seeing some of these things “play out” here in the United States. And we are careening toward recession.
President Trump signed an $8.3 billion spending bill on March 6 to help fund the U.S. response to the crisis. Then on Friday, he declared a national emergency and freed up even more funds.
A large portion of the money will go to biotech companies already ramping up drug and vaccine programs to fight COVID-19.
Many of these companies saw their shares soar in the midst of the worst market rout since 2008. And while the first move has already happened, there’s a lot more value to be mined from select stocks over the coming weeks.
In particular, investors should take note of companies that make …
Antiviral Drugs
Companies are delivering a variety of treatment options. The first tier includes antiviral drugs.
Gilead Sciences (NASDAQ: GILD) might be the single best pure play right now. The company’s antiviral drug remdesivir may be effective against the coronavirus. The drug has been rushed to China for clinical trials. (Results are expected in April.) Remdesivir has already shown promise against MERS and SARS, coronaviruses structurally similar to COVID-19.
The latest news to boost the stock was a comment by the CDC director saying remdesivir was now available via “compassionate use” to patients in Washington state. Basically, this allows access to drugs that haven’t been 100% approved in extreme cases where the drugs are believed to help.
But even if there had never been a coronavirus outbreak, Gilead still would be a viable value play. For one, Gilead is so much more than remdesivir. It boasts 25 marketed products in the United States. Its shares trade hands at just 11x times analysts’ estimates for next year’s earnings — far lower than the S&P 500’s 19x. It also yields a respectable 3.7% in dividends.
AbbVie (NYSE: ABBV)
Evercore ISI analyst Josh Schimmer said recently, “Repurposing HIV drugs for COVID-19 is the fastest countermeasure strategy.”
HIV and HCV (Hepatitis C) medicines showed benefit for SARS, the coronavirus which broke out in 2002. AbbVie’s HCV medicine is Moderiba.
And in late January, AbbVie donated a supply of its anti-HIV drug Kaletra/Aluvia to the Chinese as an experimental treatment for COVID-19. It’s now supplying the therapy to countries in Europe and elsewhere.
Cocrystal Pharma (NASDAQ: COCP)
This clinical stage biotech company has entered into an agreement with Kansas State University Research Foundation to develop commercial compounds for treating both Norovirus (common on cruise ships) and coronavirus infections.
Cocrystal’s technology targets enzymes important for viral replication.
I’ll have more ideas for you next week. For now, stay safe.
All the best,
Sean
