PreMarket Prep Stock Of The Day: Gilead Sciences

Benzinga's PreMarket Prep airs every morning from 8-9:00 a.m. EST. During that fast-paced highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to a recording, Benzinga will highlight a stock of the day that was featured on the show.

Stock Of The Day: Gilead

When the broad markets go up, not all stocks go up. When the broad market goes down, not all stocks go down. For example, when the markets are deep in the red, issues related to gold may shine as a response to "flight to quality" in uncertain times as gold futures are trading at a seven-year high.

Also, there can be a catalyst specific to one issue that dominates the price action for the session. An excellent example of this dynamic is the price action in Gilead Sciences GILD.

Original Catalyst: Solvadi For The Treatment Of Hepatitis C

When Gilead peaked in June 2015 at $123.37, the catalyst for the company was its revolutionary Hepatitis C drug, Sovaldi. The difference maker with this drug is that it actually helps cure the liver disease that may affect over 100 million people worldwide.

While the drug was great for those affected with the disease, potential competition from rival drug companies induced the company to drastically raise its price. As a result, patients were alarmed at the price gouging, which eventually attracted a Senate investigation.

Although the drastic price increase sent the issue to a new all-time high, it suffered a sharp decline and the Street's message was sent loud and clear: when a pharmaceutical firm finds a cure for one disease, they better have other drugs in the pipeline to keep its share price heading north.

Price Action Since Making All-Time High

While the broad market and many other biotechnology companies appreciated greatly in the last five years, Gilead has not.

Its initial descent off its all-time high did not find a bottom until June 2017 at $63.76. Since that low, it has made a few monthly lows in the $61-$63 area with the most recent being in January at $62.33. On the upside, the issue has not traded above $80 since March 2018 and struggled to clear $70 over the last year.

Potential New Catalyst: Remdesivir To Treat Coronavirus

As the world grapples with the ramifications of the outbreak of the coronavirus and lack of containment up to this point, what the world needs is a cure.

While several drug companies have drugs in the pipeline, Gilead's Remdesivir has attracted many headlines. And in this news-driven, lack of true fundamental focused market, that's all that matters.

If any investors reacted to the initial reports of the company's potential cure, they're sitting on a nice profit. The first time the company was associated with a cure for the virus was before the open on Feb. 4, when it ended that session at $67.40. A downgrade the following day and subpar fourth-quarter report instigated a dip to $64.07, but quickly recovered.

Catalyst Gains Momentum With The Spreading Of The Disease

With the spread of the virus to other countries outside of China and the region over the weekend, the need for a cure becomes more dire. As a result, investors are purchasing shares of the issue based on its potential cure for the disease. Following a much higher open, the issue rallied to $74.52 and is holding a majority of its gains for the session.

On many occasions, when an issue gets moving in one direction with a potential catalyst, it sometimes doesn't stop until the catalyst is no longer valid. In the case of Gilead, not only is the true impact virus not known, neither is the validity of the company being on the path to a potential cure.