Why I Am Not Selling Gilead

Kanak Kanti De profile picture
Kanak Kanti De


  • AbbVie’s hepatitis C treatment was approved by the FDA last Friday.
  • AbbVie and pharmacy benefit manager Express Scripts have reached an agreement under which AbbVie’s hepatitis C treatment has been given exclusive status in return for significant discount.
  • Gilead shares have tumbled on the news, however, the impact of the agreement could be minimal on Harvoni sales.

AbbVie's (ABBV) hepatitis C treatment was approved by the FDA last Friday and as expected, the company did not significantly undercut the price of Gilead's (NASDAQ:GILD) Harvoni. The treatment cost of AbbVie's Viekira Pak is $83,319. This is around $10,000 below Gilead's single-tablet regimen of Harvoni. However, what has taken everyone by surprise is pharmacy benefit manager Express Script's (ESRX) deal with AbbVie.

This morning Express Scripts announced that it has reached an agreement with AbbVie under which the drug maker will significantly discount Viekira Pak. In return, AbbVie has been awarded exclusive status by Express Scripts. Express Scripts, which is the largest pharmacy benefit manager in the U.S., has dropped Gilead's Harvoni from a list of approved and covered drugs that is applicable to 25 million Americans.

At first glance, this looks like a serious setback for Gilead. The company's shares, as I discussed last week, have surged this year on the back of Sovaldi and Harvoni sales. Sovaldi has already achieved blockbuster status, while Harvoni is expected to do so in the current quarter. It is not surprising then Gilead shares were down nearly 15% by mid-day trading on Monday. The sell-off though is an overreaction, which is why I am not selling Gilead.

My argument for holding on to Gilead is that at this moment it is difficult to assess how much of the market share AbbVie's hepatitis C treatment will gain at the expense of Harvoni. Both Express Scripts and AbbVie have not disclosed the discount they are offering on Viekira Pak. The 12-week treatment cost of Harvoni is $94,500, treatment naïve patients (around 40% of eligible patients) may be considered for an 8-week treatment, the cost for which goes down significantly.

But more importantly, Harvoni is a single-tablet regimen, compared to AbbVie's four to six-tablet regimen. This means

This article was written by

Kanak Kanti De profile picture
My name is Dr Kanak Kanti De, MBBS, MD, PhD, retired medical practitioner, cancer survivor, healthcare sector investor, over 30 years' experience in the sector both in India and the United States. I write/have written on Motley Fool, SeekingAlpha, Benzinga, and on Forbes. I am consistently ranked high on TipRanks, although I don't like their ranking system. My portfolio has consistently beat the various indices for years. Email me to discuss my articles, or for just an adda (Bengali for informal chat) kanak2k3@yahoo.co.in.

Disclosure: The author is long GILD. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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