Gilead: Schweitzer - Fair Analogy; Shkreli - No Way

| About: Gilead Sciences, (GILD)

Summary

A recent SA article titled "What Do Gilead And Martin Shkreli Have In Common?" gave mind share to an inaccurate meme that would brand Gilead as a ruthless profiteer.

This does a disservice to a company that has achieved singular accomplishments and belongs firmly ensconced on the "good guy" side of the biotech ledger.

The instant article's title is designed to counter with a more accurate, positive and appropriate titular association.

Introduction

I am going to brave an assumption that anyone who is reading this instant article has already read "What Do Gilead And Martin Shkreli Have In Common?" Accordingly, I will only touch on it briefly. If you haven't read it, here's a clue. The title is the sizzle.

"What Do Gilead And Martin Shkreli Have In Common?"

Don't worry, no shocking revelation exists. The first name Martin (Shkreli) has had no late night tête-à-tête with the last name (John) Martin at some disreputable locale. I daresay the coincidence of these names is about as much commonality as exists in fact in satisfaction of the article title question.

Gilead belongs on the "good guy" side of the biotech ledger.

Gilead (NASDAQ:GILD) has been at the forefront of a movement that has turned a diagnosis of AIDS from a near certain death sentence into a chronic disease. In the 1980s, fear of HIV AIDS reached hysterical levels. It is easy to forget how bad it was. Perhaps a reminder is in order:

"A lengthy Time feature, 'The New Untouchables,' published in September 1985, details exactly how extensive AIDS-related discrimination eventually became. 'Anxiety over AIDS in some parts of the U.S. is verging on hysteria,' its authors wrote; they began with the following, highly disturbing example:

'There are 946,000 children attending New York City schools, and only one of them - an unidentified second-grader enrolled at an undisclosed school - is known to suffer from acquired immunodeficiency syndrome, the dread disease known as AIDS. But the parents of children at P.S. 63 in Queens, one of the city's 622 elementary schools, were not taking any chances last week. As the school opened its doors for the fall term, 944 of its 1,100 students stayed home'."

If that is how it was playing out in the sophisticated metropolis of New York, just imagine how things must have been playing out among the solid burghers inhabiting vast swathes of middle America. By my recollection, not well.

The environment has changed so much that in 2012, the FDA approved Gilead's Truvada to:

"…reduce the risk of HIV infection in uninfected individuals who are at high risk of HIV infection and who may engage in sexual activity with HIV-infected partners.

That's quite a difference.

In both 2013 and 2014, Gilead was voted as being in the top two firms for reputation among worldwide HIV/AIDS patient groups.

There can be no doubt that controversy often dogs Gilead. This is usually because people want more access to its amazing drugs. Hostile commentators often point to the fact that Gilead was not the actual discoverer of a particular drug. Gilead acquired the compound that became the amazing drug Sovaldi in an acquisition.

That is an unquestioned fact. However, in my SA article "Gilead: One Down, Two To Go," I recount how Gilead added value through its expertise so that within 5 years, starting with Pharmasset's promising drug from a Phase 3 trial Gilead produced:

"...Sovaldi [...] less than two years later as a full-fledged FDA approved therapy for the treatment of HCV.

Gilead relied on its own labs to bring forward ledipasvir, a giant further step forward. This most dominant therapy, under the name Harvoni, achieved FDA approval only one year later in October 2014 when the FDA approved Harvoni to be used in combination with Sovaldi.

Gilead has moved on to repeated FDA approval of therapies for ever more indications. In November of 2014, Harvoni was expanded for treatment of genotypes 4, 5 and 6 and for patients infected with HIV. Harvoni's label was expanded yet again several months later in February 2016."

So yes, Gilead is willing to work with compounds that "were not developed here." Yet somehow, as soon as it becomes involved, promising trials turn into amazing FDA approved drugs, as often as not with safety profiles equal to or better than those otherwise available. Gilead charges high prices for its successful drugs. However, its achievements are not magically severable from this pricing. It takes skill to perform the tasks, which Gilead does so well. If blunderbuss regulatory hurdles start taking over, less amazing drugs will get approved.

Gilead must be doing something right with its pricing and all. In a recent survey, Gilead scored in the top tier as number 6 out of 48 pharmaceutical companies of all sorts. The study compared pharmaceutical company reputations on a range of issues such as product introductions, pricing, patient programs and corporate practices.

My very first writing for SA was one seeking to put Gilead's pricing of Harvoni into a proper perspective. A lengthy article published by Knowledge@Wharton in its Public Policy Section carrying the title "Sovaldi: Who's to Blame for the $1,000 a Day Cure?" sets out a complementary analysis. This latter article provides a comprehensive overview of Gilead's Sovaldi pricing. In doing so, it quotes a selection of professors from Wharton School. One section of the article distinguishes U.S. pricing norms from those in most other developed countries. It notes that other developed countries have a system employing:

"… a mechanism for setting limits on what drugs should cost, which is often defined as a willingness to pay a certain amount for a "quality adjusted life year" (QALY) saved, according to [Wharton's] Danzon. QALY is a formula that takes into account not just total life expectancy that will be gained by a particular health intervention, but also the quality of life patients are likely to enjoy during those years, based on their health status."

Interestingly even under such a system, Harvoni is less likely to be considered as overpriced than certain highly priced cancer drugs, such as Yervoy, Keytruda or Opdivo or any of the many MS drugs which I discuss in my article.

How Does Albert Schweitzer enter the Picture?

After reading the Shkreli article one could as well ask how Gilead entered the picture in that article. However, Schweitzer actually belongs in this article. For my reference, I have recourse to Ajax 133's comment to the Shkreli article. Ajax 133 is a familiar name to those who read SA articles on Gilead. He regularly writes comments, which add substantively to the article and to its comment stream. In his comment, he states in a relevant part:

"You might like to see an article on GILD stating that they have been sending earlier generation HIV Drugs to the African Continent for many, many years for pennies. They just don't talk about it. Curing a potentially fatal nasty disease for less than $45K per patient, considerably less than most Chemotherapeutic's, that like Avastin in Colorectal Cancer, extended life by a little more than 41/2 months. This is a metric you ought to think about. I just might write an article for SA comparing Gilead Sciences to Albert Schweitzer. Not a dissimilar analogy."

I will not steal the thunder from any article Ajax may, and I hope he does in fact write fleshing out the comparison other than to say that Schweitzer and Shkreli are a classic pair of opposites.

Conclusion

My original interest in Gilead was as an investment. Since that time, I have become fatally attracted to Gilead for other reasons, albeit reasons that advance my investment thesis for the stock.

I am intrigued by Gilead's successes in treating devastating illnesses such as AIDS, HBV and HCV. I am impressed by its ability to act swiftly and effectively in shepherding drugs through the FDA approval process. I love the fact that a best in class safety profile is an important hallmark of its most important drug Harvoni. I find its outreach to developing countries to be exemplary, albeit again not without critics.

I am sure there are those who can quibble with the near panegyric that I present. In defense, I point to all those ill and suffering individuals whom Gilead has succoured with its magical therapies. As for those who lack access now, I say that Gilead's successes have increased, not decreased, the chance that your time for a successful therapy will arrive.

If Hippocrates had thought of it, he would surely have warned: "fieri non potest sanare omnes," because he would have realized that if he said it in Greek, few would understand.

Disclosure: I am/we are long GILD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.