The circuit breakers activated almost immediately when the markets opened this morning as the Dow plummeted, with investors moving into cash and away from equities. Clearly, they were not impressed with the Federal Reserve’s decision to slash its benchmark interest rate to nearly 0% to help combat the economic fallout from the coronavirus outbreak.

After the 15-minute trading pause, the markets continued to push lower, although by noon March 16 there were indications that they were moving off their lows, with the Dow down 7.6%. As far as the health care sector is concerned, the Nasdaq Biotech index was down about 4% and the iShares U.S. Medical Devices ETF, which consists of equity holdings in the leading U.S. manufacturers in the medical device sector, was down 6.6% by midday.

A strain on health care

Unfortunately, the rest of the trading session did not bring any relief. The market downturn continued to hit all sectors, although health care took slightly less of a hit than the rest. For example, the BioWorld Biopharmaceutical index, a priced-weighted index of 20 of the leading biopharmaceutical companies, closed the day down 7.6% compared to the Dow Jones Industrial average, which took an almost 13% haircut by market close.

For the year, health care equities have been under pressure in lockstep with news of the widening spread of the infection. The BioWorld Biopharmaceutical index is down 11.7% in this period, compared to the Dow that has sunk a whopping 29.2%. Two index members have bucked the trend because of their involvement with developing therapies targeting COVID-19.

Although Regeneron Pharmaceuticals Inc.’s shares (NASDAQ:REGN) took a 5% hit today, they are still trading up over 17% for the year. The company reported Monday, along with Paris-based Sanofi SA, that a clinical program evaluating Kevzara (sarilumab) in patients hospitalized with severe COVID-19 infection has just begun. The fully human monoclonal antibody inhibits the interleukin-6 (IL-6) pathway by binding and blocking the IL-6 receptor. IL-6 is thought to be involved in driving the overactive inflammatory response in the lungs of patients who are severely or critically ill with COVID-19. The company explained that the role of IL-6 is supported by preliminary data from a single-arm study in China using another IL-6 receptor antibody.

The U.S.-based trial will begin at medical centers in New York, one of the hardest hit areas in the U.S., and will assess the safety and efficacy of adding Kevzara to usual supportive care, compared to supportive care plus placebo. The phase II/III trial will enroll up to 400 patients.

Foster City, Calif.-based Gilead Sciences Inc.’s shares (NASDAQ:GILD) are also trading up 6% year to date. The company has initiated two phase III studies to evaluate the safety and efficacy of remdesivir in adults diagnosed with COVID-19 and will enroll approximately 1,000 patients at medical centers primarily across Asian countries, as well as other countries globally with high numbers of diagnosed cases, beginning this month.

The studies, the company reports, expand the ongoing research into remdesivir, which includes two clinical trials in China’s Hubei province led by the China-Japan Friendship Hospital as well as the recently initiated clinical trial in the U.S. led by the National Institute of Allergy and Infectious Diseases.

Sales will be impacted

In addition to losing market value, so far this year the global pandemic is widely expected to have a significant impact on earnings of many of the big pharma and leading medical device companies in the first quarter.

Using a financial model on the potential impact of COVID-19 on the universe of companies that they cover in the medical devices sector, Wells Fargo analysts estimate that “based on our ‘base case’ assumptions, the median estimated impact to sales and EPS in 2020 is -9.1% and -16.2%, respectively, from in China and the rest of world including the U.S. and Europe.” Their scenario assumes two months of impact in China (February and March) and roughly two and a half months of impact outside of China (mid-March through May).

Medical device companies have been hit hard this year, with the BioWorld Medtech index, which comprises a total of 185 companies covered by BioWorld, down 30.7% in value. Similar to the Dow’s performance, by the end of the trading day, the index was down 12.5% on March 16.