Stocks Climb As Gilead Says Coronavirus Trial Shows ‘Encouraging’ Preliminary Results

Plus, U.S. GDP contracted 4.8% in the first quarter, Spotify saw a 31% increase in active premium subscribers to its music streaming platform in the first quarter, while Boeing is cutting its payroll costs by 10% amid an aviation market “frozen” by the coronavirus pandemic.

Stocks rose higher to kick off Wednesday with the Dow gaining 480 points, or 2%. The S&P 500 added 2.3%, while the Nasdaq traded 2.9% higher.

Gilead shares surged higher this morning after the biotech announced positive preliminary results for its remdesivir in the treatment of patients with COVID-19. The trial showed at least 50% of the 397 patients treated with a 5-day dosage of the antiviral drug improved, with more than half discharged from the hospital within two weeks. “The study demonstrates the potential for some patients to be treated with a 5-day regimen, which could significantly expand the number of patients who could be treated with our current supply of remdesivir,” Gilead chief medical officer Merdad Parsey said in a statement. “This is particularly important in the setting of a pandemic, to help hospitals and health-care workers treat more patients in urgent need of care.” Gilead also said a separate trial by the National Institute of Allergy and Infectious Diseases met its main goal, without providing further detail. 

This was welcome news as coronavirus cases in the U.S. near 1,015,000. While deaths from the outbreak have risen to nearly 60,000 in the U.S., The New York Times reported this morning that the death toll could be far higher than CDC data suggests given total deaths in some of the hardest hit states are nearly 50% higher than normal over the five weeks from March 8 through April 11, revealing a gap between recent trends and the typical level of deaths. Meanwhile, President Donald Trump signed an executive order Tuesday that demands slaughterhouses and meat processing plants in the U.S. to remain open, even as plants around the nation have shut down as workers fell sick due to the coronavirus. The order said that “such closures threaten the continued functioning of the national meat and poultry supply chain, undermining critical infrastructure during the national emergency.” The United Food and Commercial Workers union said in a statement that if workers aren’t safe, the food supply won’t be either, and said that at least 20 workers in the meat and food processing industry have died, while 5,000 meatpacking workers have either tested positive for the coronavirus or have been forced to self-quarantine.

The Fed isn’t expected to announce any new policy changes when its meeting ends this afternoon, after already slashing interest rates to 0% among a slew of other initiatives amid the coronavirus pandemic and resulting economic shutdown. Instead, the Federal Open Market Committee are likely to turn their attention to other steps they could take to ensure a strong economic rebound when the coronavirus lock-down ends, a lock-down that caused the world’s largest economy to shrink at a 4.8% annualized pace in the first quarter. While the 4.8% marks the biggest slide since 2008 and the first contraction since 2014, it’s expected the first quarter’s result will pale in comparison with the second quarter. “If the economy fell this hard in the first quarter, with less than a month of pandemic lockdown for most states, don’t ask how far it will crater in the second quarter because it is going to be a complete disaster,” said Chris Rupkey, chief financial economist at MUFG. “One thing is for sure the economy will look very different once the restart comes. The economy fell over the cliff today, and it will recover, but the return to full employment is a dream, not a reality.” 

Alphabet shares are up more than 8% this morning after the Google parent reported an earnings beat, easing investors’ fears about the pandemic’s impact on advertising. Alphabet reported earnings of $9.87 per share and revenue of $41.16 billion after the bell Tuesday, representing 13% revenue growth year over year. CFO Ruth Porat said that while there was an “abrupt” drop-off in advertising revenue in March, the company has yet to see “further deterioration in the percentage of year-on-year revenue declines.” Elsewhere, Spotify shares are up nearly 12% today after it said paid music subscribers surged 31% to 130 million in the first quarter, driving a 22% rise in quarterly revenue for the Swedish music streaming platform. “Despite all the turbulence around the world, we hit pretty much all the metrics,” said Spotify CEO Daniel Ek. “When we saw consumption starting to decline we would have assumed that monthly active users and paid subscribers would be negatively impacted, but that wasn’t the case. In fact both new and reactivated monthly active users grew substantially during [the] lockdown period in major markets.”

In not-so-good earnings news, Boeing said it had a $641 million loss in the first quarter and burned through $4.3 billion in cash in the period. The planemaker said it plans to cut payroll by about 10% through voluntary measures and “involuntary layoffs as necessary” in an aviation market “frozen” by the coronavirus pandemic. “We’ll have to make even deeper reductions in areas that are most exposed to the condition of our commercial customers – more than 15% across our commercial airplanes and services businesses, as well as our corporate functions,” said Boeing CEO Dave Calhoun in a staff memo. Ford, meanwhile, reported a per-share loss of $0.23 in the first quarter on sales of $40.3 billion, and said it expects to lose about $5 billion on an operating basis for the second quarter. And General Electric reported an 8% year-over-year decline in first quarter revenue to $20.524 billion. “The impact from COVID-19 materially challenged our first-quarter results, especially in Aviation, where we saw a dramatic decline in commercial aerospace as the virus spread globally in March,” said CEO Larry Culp in a statement. Culp said that the company is expecting cost cuts of more than $2 billion along with $3 billion in cash preservation to cushion the coronavirus blow, noting that the second quarter is likely to be worse than the first. “The second quarter will be the first full quarter with pressure from COVID-19, and GE expects that its financial results will decline sequentially,” GE said.

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iBio Inc (OTC: IBIO): iBio shares jumped as much as 65% yesterday after it gave an update on its COVID-19 vaccine manufacturing capacity. “If our own proprietary SARS-CoV-2 Virus-Like Particle (“VLP”) program, IBIO-200, results in an approved vaccine, we estimate that we could make about 500 million doses of high-quality product annually at our Texas facility, depending upon the potency we see in the clinic,” said Tom Isett, Co-Chairman & CEO of iBio. “That scalability links directly to the modular technology behind our FastPharming Manufacturing System, which uses a relative of the tobacco plant as the ‘bioreactor’ to produce biopharmaceuticals. So, the amount of product generated by a single plant is consistent from research- to commercial-scale, and scale-up is achieved by simply growing thousands more plants within our 130,000 square foot facility.”