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Gilead’s Latest Stumble Quashes Last of Covid-19 Drug Gains

(Bloomberg) — Gilead Sciences Inc. tumbled after failing to win regulatory approval of an experimental arthritis drug that had been touted as the biotech’s next $1 billion blockbuster, eroding the last of its gains from the Covid-19 crisis.

Before the pandemic, Gilead shares were beaten down as investors eyed an aging stable of drugs mainly targeting HIV and hepatitis C. Yet, its rheumatoid arthritis drug filgotinib was seen as a bright spot in the pipeline. Tuesday’s complete response letter from the U.S. Food and Drug Administration throws Gilead’s future growth back into question.

Gilead fell as much as 4.4% Wednesday while its Belgian partner, Galapagos NV, plunged 24%, it’s biggest decline ever.

Gilead is trading at intraday lows not seen since mid-March, before a Covid-19 fueled rally on its plans to develop a medicine for the pandemic. The Foster City, California-based company gained $16 billion in market cap between March 16 and April 30, the day before Veklury, previously known as remdesivir, received emergency use authorization from the Food and Drug Administration.

Interest from daytraders jumped in April and peaked just a few days after Veklury’s approval, according to data from Robintrack, a site that tracks Robinhood trading activity. Daytrader interest fell to below 90,000 in mid-August, down from an early May peak of over 121,000 users, data show.

Gilead shares have fallen 21% since April 30, while the S&P 500 Health Care Index rose 7.8%.

“It was a classic sell on the news,” Oppenheimer analyst Hartaj Singh said of the FDA nod. Singh, who rates Gilead outperform, is still positive on prospects for the arthritis drug filgotinib’s approval, which he expects in 2021.

‘Supply Constraint’

On Veklury, “Gilead is working, but there’s still a supply constraint,” which may last until October, Singh said by phone. Until then it may be difficult for the the company to make more supply pacts for the anti-viral treatment.

Retail traders are still active in other Covid-19 vaccine and treatment names including the likes of Regeneron Pharmaceuticals Inc. and Moderna Inc., “but if those drugs get approved, they will probably peel back also,” Singh said of the biotech stocks. For daytraders “that’s not their competency,” and they will likely again sell on such news, he cautioned.

For institutional investors, competition for Gilead’s Veklury from vaccines won’t matter much, Singh said. Outbreaks of the novel coronavirus are likely to continue for years to come and the antiviral drug will still be needed, the question being only by how much, he said.

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