Gilead Covid-19 Drug May Exceed $2 Billion Sales, Piper Says

(Bloomberg) -- At $4,500 for a round of treatment for Covid-19, remdesivir, Gilead Sciences Inc.'s new medicine could be reasonably priced and still generate over $2 billion in revenue for the biotech, according to analysts at Piper Sandler.

That's the maximum price that the Institute for Clinical and Economic Review recommended for a 10-day treatment of Gilead's remdesivir, which received emergency approval from U.S. regulators on Friday. Gilead has so far been quiet on its pricing plans and didn't immediately respond to e-mailed requests for comment.

When you are talking about saving a life, that $4,500 “seems really reasonable,” Piper Sandler's Tyler Van Buren said in a phone call. Even after a promise to give away the first 1.5 million vials, the drug could generate more than $2 billion in sales by the end of the year based on that price tag, Van Buren said. He doesn't expect Gilead to disclose pricing until after the donated supply has been used up. And “several billion in sales are easily achievable” with the number of hospitalized Covid-19 patients remaining high for the foreseeable future.

A number of Wall Street analysts have been getting more cautious on Gilead's ability to make a profit from remdesivir amid the pandemic, spurring several downgrades last week. The Food and Drug Administration clearance followed results from a U.S.-led study suggesting the drug shortened hospital stays, conflicting with results from China that showed remdesivir had no effect on preventing deaths.

At $4,500 per patient, remdesivir “would have a gross margin and overall profit contribution that is below the company's other products, but not highly dilutive to the company's future profitability outlook,” Leerink's Geoffrey Porges wrote in a note to clients Monday.

ICER's estimate rests on remdesivir showing a mortality benefit. The nonprofit agency said if the company is looking to simply recover the costs of producing it, a 10-day treatment regimen should cost about $10. That figure doesn't include the cost of research and development as remdesivir was previously developed for hepatitis C, ICER said.

A $1 per day pricing for the treatment rung true for one consumer group, Public Citizen, which claimed that should be enough to cover the manufacturing costs and “a reasonable profit” to the Foster City, California-based Gilead.

“If Gilead intends to price remdesivir at more than $1 per day, Gilead must fully disclose its research and development costs and all public contributions associated with remdesivir's development. Then payers and independent experts can analyze again what constitutes fair pricing in a pandemic,” Peter Maybarduk, director at the consumer advocacy organization, said in a statement.

Gilead is no stranger to drug-pricing debates after political scrutiny over the price of its HIV medicines. The company has said it may spend $1 billion on remdesivir this year.

The stock was up as much as 2.3% in early U.S. trading Monday, and pared some midday losses after the head of the World Health Organizations' health emergencies program said it planned to engage in talks with the biotechnology company on how the drug may be made more widely available as more efficacy data becomes available.