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Gilead Sciences and Regeneron Pharmaceuticals are both making progress in developing treatments for coronavirus, according to a report published Monday by Leerink Research. But the stocks were off more than 4% in afternoon trading, a sign that investors remain skeptical.

Early indications are that Gileads (ticker: GILD) antiviral drug Remdesivir, originally developed to treat Ebola virus, is the most promising treatment for severe cases of coronavirus, analyst Geoffrey Porges writes.

Gilead is moving ahead with two pivotal studies in China, with 233 patients enrolled in a higher risk group with severe pneumonia and 63 patients enrolled in a less severe pneumonia group, as of March 6. The treatment course is five days or 10 days by IV infusion, he writes, and it seems likely that investigators have seen early indications of whether patients are responding.

Porges also notes that early reports from Chinese social media and specialists in the field suggest a more positive clinical course is being seen in patients who receive the drug versus a placebo. And thats consistent with Gileads actions in starting similar trials in South Korea and the U.S. There are now five or six large randomized trials of Remdesivir around the world, he notes, which is highly consistent with positive expectations for the medicine.

Gileads antiviral isnt the only medicine on the market to treat the coronavirus. Anecdotal reports are that Abbvies (ABBV) Kaletra may be effective, along with medicines such as Actemra, made by Roche (RHHBY), Olumiant, made by Eli Lilly (LLY), and other antivirals and anti-infectives, according to Porges.

Regeneron (REGN) is also developing preventive medicines and therapeutic antibodies.

Regeneron believes they have a solid probability of success, Porges writes, and its confidence will likely increase as the company tests various antibodies and scales up manufacturing, with human clinical trials ideally starting by late summer.

Regeneron has three or four treatment strategies in the works, including an antibody cocktail that could work against different viral proteins identified from its VelocImmune mouse technology, according to Porges. Thats the same approach Regeneron successfully used to develop an Ebola vaccine and drug candidates to treat other viruses, such as MERS, Dengue and Zika. The approach could work for both preventing coronavirus-related diseases and in treating the infection.

One problem could be that antibody treatments may exacerbate the bodys inflammatory response, potentially causing more harm, even as the drug attacks the virus itself.

But if the approach works, Regeneron has the scale to go from initial investigation to human testing quite rapidly. While that can take 12 to 24 months for other drugmakers, it may only be a few weeks at Regeneron, Porges writes. Even with that scale, however, Regenerons capacity would be hundreds of thousands of doses a month, not the millions that might be needed.

What does this mean for the stocks? Gilead has already gained 16% this year, partly on hopes that its coronavirus drug will lift revenue and profit. But RBC analysts downgraded the stock from a top pick rating to Outperform on Monday. We remain less convinced about the potential for success and/or monetization of remdesivir in coronavirus, they wrote, though they see upside coming from Gileads other drugs on the market and in development, and view the stock as a defensive play in the current volatile market.

At nearly 12 times estimated 2020 earnings, though, they see less dramatic a disconnect to fair value. Their price target is $86.

Regenerons coronavirus efforts may not lift the stock either. The company doesnt expect to make a profit from its efforts to prevent or treat Covid-19 (the disease caused by coronavirus), Porges writes. Shares of Regeneron have gained 28% this year.

But some analysts still see upside. Canaccord Genuity upgraded the stock to a Buy with a $550 price target in late February, making a case for Regenerons major product, Eylea, irrespective of coronavirus treatments.

Write to Daren Fonda at daren.fonda@barrons.com

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Two Companies Are Making Progress on Coronavirus Treatments. The Stocks Arent Responding. - Barron's