No Changes to Healthcare Stocks Amid Coronavirus

We're not making any changes to our fair value estimates within our healthcare coverage as a result of the novel coronavirus (2019-nCoV) outbreak. As scientists and physicians grapple with finding treatments or vaccines, investors have been eager to find firms that have the most promising technologies for containing the spread of the virus and helping currently infected patients recover. For example, shares of Gilead rose significantly on Monday as investors processed the news that the first confirmed U.S. case of 2019-nCoV appears to have responded to Gilead's investigational Ebola virus treatment remdesivir.

However, with a placebo-controlled trial of remdesivir just beginning in China and other potentially generic treatment options also being tested, we're not making any changes to our Gilead fair value estimate at this time. Beyond Gilead, other names in our coverage--like Roche, whose diagnostics arm has a coronavirus assay available for research use but not yet approved--could see some tailwinds as need for diagnostics rises. Medical supplies (preventive products like masks and soaps and commodity hospital supplies like saline solutions) could also see increased short-term demand. However, we don't assume any significant long-term financial impact from the outbreak.

Unless 2019-nCoV has staying power, most of these sales tend to reverse in the following year, limiting the impact of any valuation effect. Additionally, most of the supplies used to prevent the spread of viruses tend to be commodity-like products, so there is more limited ability for firms to retain excess profits, especially over the long term.

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