Coronavirus Treatment: Could Gilead Reap Billions In Remdesivir Sales? – Investor's Business Daily

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Gilead Sciences (GILD) set a $3,120 price tag for its coronavirus treatment, remdesivir, on Monday — undercutting more bullish expectations.

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The biotech company based this price on “the potential value remdesivir provides,” Chief Executive Daniel O’Day said in a written statement. Studies show remdesivir can shorten recovery time for patients with moderate to severe Covid-19 by an average of four days.

A four-day shorter hospital stay can save hospitals about $12,000 per patient, he said.

“Even just considering these immediate savings to the health care system alone, we can see the potential value that remdesivir provides,” O’Day said. “This is before we factor in the direct benefit to those patients who may have a shorter stay in the hospital.”

In midday trading on the stock market today, Gilead stock edged up 0.6% near 75.

Pricing A Coronavirus Treatment

That $3,120 price tag applies to U.S. patients with commercial insurance. It’s based on a price of $520 per vial of the coronavirus treatment. On average, patients will need six vials over the course of five days.

In comparison, patients covered by Medicare and Medicaid — as well as those in other developed nations — will pay $390 per vial. That equals $2,340 for a five-day treatment. At this price, says O’Day, patients shouldn’t have difficulty accessing remdesivir.

The price tag is also well below broader expectations.

The Institute for Clinical and Economic Review, which examines the value of drugs, put a fair price for the coronavirus treatment at $4,500, RBC Capital Markets analyst Brian Abrahams said in a report to clients.

It’s important to note that remdesivir isn’t yet approved in the U.S. Rather, it has emergency authorization as a coronavirus treatment. Remdesivir also gained conditional marketing authorization in Europe last week.

Transitioning To Commercial Remdesivir

Gilead is donating its entire supply of the coronavirus treatment through the end of June. Then, the biotech company will transition to a commercial model. RBC’s MacKay expects Gilead to sell 1.5 million courses of remdesivir and generate $2.3 billion in 2020 sales.

That would equal $1.3 billion in profit. But MacKay doesn’t put much stock into the longer-term value of the coronavirus treatment.

This is due to “the likelihood of ultimate development of a vaccine (or herd immunity), the likelihood other therapies will produce similar or greater benefits perhaps with more convenient administration and Gilead’s large existing $20 billion per year revenue base,” he said.

Still, he has an outperform rating on Gilead stock.

Gilead’s Next Blockbuster Drug?

SVB Leerink analyst Geoffrey Porges called for a $5,000 price tag for remdesivir in the U.S.

“Since Covid-19 impacts senior adults the most, who are generally covered by the government medical plan, the $2,340-$4,290 per treatment course (for five days vs. 10 days, respectively) in the U.S. is slightly below our expectations,” he said in his note to clients.

However, the price tag outside the U.S. is higher than expected. Many countries negotiate drug prices and would likely have paid less for the coronavirus treatment, he said. Further, government stockpiling will be at a significantly higher price than expected, he said.

Porges expects the $1.9 billion in remdesivir sales in 2020 growing to $6.6 billion in 2021.

“We believe the disclosed (remdesivir) pricing is reasonable, and should provide significant value to the Gilead shareholders and still deflect much of the criticism the company might face in this emergency,” he said. Porges kept his outperform rating on Gilead stock.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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