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Which healthcare stocks are benefiting from the coronavirus crisis?

Gilead-w

Is Gilead’s Remdesivir a cure?

Perhaps no single drug is more associated with its manufacturer’s success than Bayer’s Aspirin. Developed by German chemist Felix Hoffmann to alleviate his father’s rheumatism, the painkiller has been sold as an over-the-counter tablet since 1915, generating massive profits and transforming the business orientation of the erstwhile dyestuff manufacturer.

Today, in the face of the novel coronavirus outbreak, pharmaceutical companies are looking for a new miracle drug. Two weeks ago a traditional Chinese medicine known as Shuanghuanglian – concocted from three types of plants – became a commercial hit following a report by the People’s Daily that the herbal remedy could “inhibit” the coronavirus. The news even sparked panic-buying of mooncakes, a delicacy typically eaten during the Mid-Autumn Festival, simply because some versions are called shuanghuanglian in Mandarin.

No surprise then that China’s stock market punters have been quick to react when a company claims that it is ready to supply a more scientific remedy. BrightGene Bio-Medical Technology saw its Shanghai-listed shares spike 20% on Wednesday, after saying that it had started mass-producing the active ingredients for synthesising Remdesivir, a leading candidate (developed by America’s Gilead Sciences) to treat the contagious disease.

The news came a week after Gilead began clinical trials of Remdesivir in Wuhan, where a total of 761 patients have been enrolled in a randomised and placebo-controlled study. The experimental drug has demonstrated good antiviral activity against the SARS and MERS coronaviruses in earlier cell and animal experiments, according to Gilead’s chief medical officer Merdad Parsey.

Suzhou-based BrightGene says it will now focus on manufacturing the drug but that it doesn’t expect the move to have much impact on its financials this year. A main reason is that it lacks the intellectual property rights to make the drug or the official approval to roll it out in the Chinese market. That means that any production of Remdesivir will be booked as a “social donation”.

Another company that is benefiting from Gilead’s innovation is Porton Pharma, which has been providing contract development and manufacturing services to Gilead for Remdesivir since 2015. On February 7, the Chongqing-based firm announced it had received orders from Gilead to support the production of Remdesivir, leading its Shenzhen-listed shares to soar 77% when the market reopened after the extended Chinese New Year break.

Porton Pharma’s stock rally was further fuelled by its involvement in the production of Darunavir, an HIV drug that a research team at Zhejiang University has identified as another potential cure for the new coronavirus. Developed by Johnson & Johnson, Darunavir accounted for 18% and 14% of Porton’s revenues in 2018 and 2019 respectively, according to ThePaper.cn.

Other investors are betting on drug distributors, online pharmacies, medical equipment suppliers and diagnostic devices makers – all of which have been experiencing a surge in demand since the outbreak became widespread last month.

Shares in Shenzhen Mindray Bio-Medical Electronics, China’s largest hospital devices maker, are also up 30% since the beginning of this year. With about 60 temporary hospitals already being built in 20 provinces across China (see this week’s “Healthcare” section for more on the pair opened in Wuhan) Mindray’s sales are expected to surge by a third in the first quarter, according to the South China Morning Post. Its diagnostic test kits – of which there is a severe shortage – are viewed as a key income driver.

Zhende Medical and Allmed Medical Products, two leading producers of surgical masks and medical protective gear, have also seen their shares jump as much as 128% and 165% respectively this year. Meanwhile companies including BYD, Foxconn and Sinopec have set up production lines for mask-making in a bid to fill demand for a product that has little to do with their core businesses.


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