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A Change From Gilead

May 06, 2020 6:46 PM ETGilead Sciences, Inc. (GILD)82 Comments
Biotech Beast profile picture
Biotech Beast


  • Gilead wouldn't give the details the market wanted regarding the remdesivir business model on the recent earnings call.
  • Its recent update can be interpreted as attempting to provide any color possible on the business model to satisfy the market.
  • The recent update itself isn't much, but I think it could signal that the company has heard the complaints and may provide details on the remdesivir business model with more urgency.

Gilead Sciences (NASDAQ:GILD) produced solid results recently with its COVID-19 drug remdesivir, but the market reaction has been muted. In an article earlier this week, I noted that remaining uncertainty on a few factors concerning remdesivir had stopped the stock running. GILD is listening to the market it seems, as this article discusses, by trying to address some of the uncertainty.

Analysts dropped some hints

On the company's Q1'20 earnings call, analysts repeatedly attempted to get clarity on the profitability of remdesivir by asking about potential revenues and pricing of the drug. GILD was forthcoming with details on expenses, both in Q1'20 and going forward, but stayed mute on revenue and pricing.

... On the revenue side, it is just as Andy mentioned also and I mentioned, it's too premature. You know there's a lot of moving parts right now... On the expense side, Andy, I mean, obviously you had mentioned already that up to $1 billion and unclear on how the accounting will occur.

- Daniel O'Day, GILD CEO

I appreciate it... A billion of expenses and not knowing the revenue, it's an interesting position. Appreciate it. Thank you.

- Michael Yee, analyst at Jefferies, Q1'20 earnings call (Emphasis mine)

One analyst seemed to note that providing numbers on expenses and nothing on revenue was not ideal. Another analyst asked what the difference between COVID-19 and HIV was, perhaps attempting to get something on the remdesivir business model.

... Gilead has generated effective returns for investors and effective return on capital from treating hepatitis C and potentially nearly eliminating hepatitis C from treating HIV and turning it into a chronic disease, and to building a really important global stockpile of antiviral for influenza. So, what's special about COVID.

- Geoffrey Porges, analyst at SVB Leerink

... You mentioned some parallels to HIV, HCV even

This article was written by

Biotech Beast profile picture
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Comments (82)

Proof you can read anything on the news today.
@getthefacts4achange and others.
I thought that patent theft was only possible in dictatorships, but not in the promised land of democracy like the United States. Expropriation must always be well compensated in a democracy. So there shouldn't be any heavy damage. The development costs, which should have long been written off for tax purposes, will be compensated in any case. And the normal company profit is also secured. Only usury prices are not covered. That's why I don't understand the analysts. The profit zone is also better intact than analysts thought for 2020. I will stick with it: GILD is a must have for long-term investors.
Biotech Beast profile picture
I don't think anyone is going to take GILD's patent, GILD are the people who know how to scale up production and are already doing that.
Flex68 profile picture
"Why I'm Finally Bullish On Gilead"

Thinking you kinda missed that window.....
If a country needs something that is of extreme important to its defense or health it can null and voids patents. Even in the US. The Us government can decide to ignore any patents to produce and sell a drug for Covid19.
Does that happen often?
What you are saying amounts to an unconstitutional taking of property, in this case, intellectual property. It won't happen. Instead, Gilead has also donated its initial production of remdesivir for Covid-19 treatment. That may sound like no money for Gilead, but actually, it amounts to a very large tax deduction that could include most of the development costs for the drug.
NDHT profile picture
The compulsory licensing happens a lot in developing countries. They don't have the money but have the needs. What do you want them to do? Below is from Wikipedia:

A compulsory license provides that the owner of a patent or copyright licenses the use of their rights against payment either set by law or determined through some form of adjudication or arbitration. In essence, under a compulsory license, an individual or company seeking to use another's intellectual property can do so without seeking the rights holder's consent, and pays the rights holder a set fee for the license. This is an exception to the general rule under intellectual property laws that the intellectual property owner enjoys exclusive rights that it may license – or decline to license – to others.
calstang66 profile picture
Lots of concern about Gilead make profits soon from Remdesivir. Hey, they will be making money, possibly immediately selling licensing to partnering manufacturers in "Asia, Europe and developing countries". And royalties (or shared profits). Sounds good to me. And Stock Up Too!!
i highly doubt it. the CEO will probably give the license away for free
A government anywhere can just null and void any valid patent -- in a time of national crisis - even in the USA
He is just a hired hand, not the founder or owner.
I read with interest your recent article about Gilead. I believe that Leronlimab a new drug owned by CytoDyn a small OTC firm in Washington state represents a potential double financial whammy to Gilead.

1) Leronlimab is a new HIV drug waiting final BLA approval from FDA. It has proven to be a safe and effective drug after several trials with over 800 HIV patients. More specifically,the trials results showed: a) No serious side effects,b) No toxicity, c) No drug resistance and d) High patience convenience due to its weekly subcutaneous administration. According to Biologics' 4/30/20 SA article about Leronlimab (or Virologix), CytoDyn may eventually have a $9 billion revenue winner after Leronlimab is registered as a monotherapy and perhaps higher once it offers a PrEP for HIV.

“It is important to note, FDA approval is essentially the only major obstacle stopping Vyrologix from hitting the market. The company has a commercial partner for U.S. HIV indications and two manufacturing to produce Vyrologix, so the company can quickly launch and start collecting a paycheck before the year is out.
“Once the company has secured approval and launched in the U.S., the company will able to turn some of its attention towards a registration trial for Vyrologix as a monotherapy. Furthermore, CytoDyn is looking to test Vyrologix as a pre-exposure prophylaxis (PrEP) for HIV, which would arguably make Vyrologix the world's premier HIV therapeutic.”

2) Leronlimab also appears to be effective against COVID19 and far superior vs competition. COVID-19 patients die due to the chain reaction known as a cytokine storm in the immune system which causes pneumonia and other deadly internal consequences . Lerolimab is a viral entry inhibitor that works by blocking the CCR5 portal that the COVID-19 virus uses to enter cells.It addresses the COVID-19 induced deficiencies caused across the spectrum of the disease.

More specifically, very positive trials results among 54 EIND CONVID patients approved by the FDA for compassionate care in NYC and California showed that Leronlimab is the perfect Trifecta bet because it: 1) restores the patient's immune system, 2) controls the deadly cytokine storm and 3) reduces the patient's viral load. A long expected article reviewing the first cohort results at the Montefiore Medical Center in NY is FINALLY out for peer review. Additional articles are expected. For now, it should be known that all 23 COVID-19 patients belonging to a second cohort survived. These were also ICU patients with 6 patients were in critical condition (intubated) and 17 severely-ill patients, needing oxygen support.

The article's title is: Disruption of the CCL5/RANTES-CCR5 Pathway Restores Immune Homeostasis and Reduces Plasma Viral Load in Critical COVID-19


but for now this following key paragraph captures some of the findings. Note the last sentence. This may present a threat to the World's blood banks' transfusion supply.

107 At study day zero,all ten critically ill patients received a subcutaneous 700mg injection of 
108 leronlimab following baseline blood collection. Because defining features of severe 
109 COVID-19 disease include plasma IL-6 and T cell lymphopenia2, and we observed
110 >100-fold increased CCL5 levels compared to normal controls (Fig 1d), we longitudinally 
111 monitored these parameters for two weeks after leronlimab treatment. A reduction of 
112 plasma IL-6 was observed as early as three days following leronlimab and returned to 
113 healthy control levels by day 14 (Fig. 2a).In contrast, more variable levels were observed 
114 with IL-1b, IL-8, and CCL5 after leronlimab treatment (Supplementary Fig. 2). Following 
115 leronlimab administration, a marked restoration of CD8+ T cells (Fig. 2b) and a 
116 normalization of the CD4+ and CD8+ T cell ratio in blood was observed (Fig. 2c). These 
117 immunological changes occurred concomitant with full leronlimab CCR5 receptor 
118 occupancy on the surface of CCR5+ T cells and macrophages (Fig. 2d, 2e). Low levels 
119 of SARS-CoV-2 have been detected, but not yet quantified in the plasma of COVID-19 patients.

Elsewhere in the article, what I find more interesting is that the researcher (Dr. Bruce Paterson) may have identified the real culprit behind COVID-19. Importantly, the blood tests involving the same COVID-19 EIND patients suggest that the inflammation, blood clotting and other side effects that are now being seen in people affected by the COVID may be caused by an excess of the Rantes protein.

This excess of Rantes increases production of a cytokine named  IL-6 which triggers the production of inflammatory proteins. Rantes is a NEW significant discovery regarding COVID-19. His research shows that Rantes in COVID-19 patients is found 100 times above the normal levels in critical patients,and 5 times the normal level in mild to moderate patients. Lerolimab appears to BLOCK the Rantes protein. The Leronlimab's blockade also increases CD8+ cell production which lowers viral levels. Hopefully, this finding will be confirmed,thus, reducing the COVID mortality.
Goalkick9 profile picture
Leronlimab is a "new" drug? Not hardly. It's been around for 15 years and has been hyped by CYDY for everything from breast cancer to melanoma to HIV and, now, COVID-19.
Biotech Beast profile picture
Every time I think about looking into CYDY, I don't bother because I get the feeling it is just being pumped up a little bit.
Time will tell. Two fully randomized/controlled Leronlimab trials results will soon be available. Rather than getting into polemics, I suggest we both wait for the science-based truth to emerge rather than wasting time discussing the past.

Regarding the science-based truth, I have a brilliant daughter who is a Vet with a Master in Public Health as well as a Master in Science in Zoonotics. Thus, when she brought up to me CYDY's Leronlimab a a potential therapy against COVID-19, I carefully listened. BTW,she knows a great deal about coronavirus in general and Feline Infectious Peritonitis (which is caused by coronavirus) in particular.

As already proven with my previous post, I do not opine without documented support. Please note the mention below that the medication used in China to fight Feline Infectious Peritonitis (FIP) is one molecule away from Remdesivir. Obviously, China has the know how to replicate Remdesivir in a NY second. I was an International banker before retirement and in my previous world the above factoid would be characterized as a "Chinese extreme country risk to the US market". Good luck.

From FIP Warriors Facebook page by Dr.Niels C. Pedersen, DVM, PhD, School of Veterinary Medicine, UC Davis.

Dear Veterinarians, cat owners and public: I am being increasingly questioned about the relationship of GS-441524 and a very promising treatment for Covid-19, Remdesivir. GS-441524 is the the biologically active component of Remdesivir and has been widely used around the world to safely and effectively cure cats of feline infectious peritonitis (FIP) for over 18 months. FIP is a common and highly fatal coronavirus disease of cats. GS-441424 and Remdesivir are almost identical drugs. Remdesivir is the form of GS-441424 that Gilead Sciences has chosen to use in humans for COVID-19 and is now in clinical trials in China, USA and several other countries.
Remdesivir is what is known as a prodrug. A prodrug is altered by infected cells to yield the active ingredient, which in this case is basically GS-441524 with the addition of one phosphate group (i.e., GS-5734). Gilead scientists slightly altered GS-5734 to protect the added phosphate group and allow absorption into cells. This form of GS-441524 is what is known as Remdesivir. Once in the cells, cellular enzymes remove the protection to yield GS-5734. GS-5734 is further activated by the addition of two more phosphates in the cells to the triphosphate form of GS-441524. This is the molecule that inhibits the production of viral RNA. We chose to use GS-441424 for treatment of the coronavirus disease FIP because it had identical antiviral properties to Remdesivir and at the time was not under consideration by Gilead Sciences for use in humans. GS-441524 is also much cheaper to make than Remdesivir.
Therefore, there was no apparent conflict with using one form for cats and another form for humans. However, Gilead came to believe that our cat research would interfere with their ability to get Remdesivir approved for humans and refused to grant animal rights for GS-441524. This refusal, coupled with the desperate need around the world for the treatment of FIP, led to a Chinese black market for GS-441524. FIP is also a significant problem in pet cats in China, and Chinese cat owners were even more desperate for a treatment for FIP than owners in other countries. The first papers describing GS-441524 treatment of cats with FIP were published in 2018 and 2019 and thousands of cats have been treated since then.
In spite of this experience, the medical profession, including researchers, have been seemingly unaware of the use of GS-441524 for a coronavirus disease of cats and its relationship to Remdesivir. Veterinarians also have considerable experience with coronaviruses, coronavirus diseases, and coronavirus vaccines for swine, calves and poultry that has gone unappreciated. Pet ferrets also suffer a severe FIP-like disease caused by their own species of coronavirus.
What will happen to supplies of GS-441524 for cats if Remdesivir is proven to be safe and effective as a treatment for Covid-19? GS-441524 is the first critical step in the production of Remdesivir and it is logical to assume that there will be a competition between cats and humans for it. On a positive note, world wide approval for Remdesivir may also help change minds against granting animal rights for GS-441524. If approved for human use, Remdesivir, if not GS-441524, would become “legally” available through veterinarians. However, the safety and efficacy of Remdesivir for FIP has not been established.
I'm a stockholder and much more concerned about getting the pandemic under control than making money one way or the other. This drug alone doesn't seem to do much to save lives, at least given in the ICU, but apparently saves people days of absolute misery. That's something good in itself. Hopefully they'll find combos that work, or earlier treatment or an oral drug so we don't have to continue to live our lives as hostages to this virus.
Biotech Beast profile picture
Yes, combos are an obvious next step, the curve is taking a while to roll over in the US, there is still a huge incentive to do drug development here. You could get a result on combos in another two months, and save many lives if it works. This disease isn't going to be all gone two months from now.
WarrenJF profile picture
Are you referring to combining remdesivir with cytokine storm inhibitors? And, what's the status of this spectrum of drugs? I see that a number of them are being tested or have been proposed for testing; this group includes Fedratinib, CTZ, Interleukin-6. It's my understanding that the actual ARDS symptoms are mainly produced by these storms, which occlude the lungs and prevent O2 exchange, not Covid-19.

If you suppress virus replication with remdesivir, is the cytokine response diminished (fewer "bad guys to fight")? If cytokine response is lower ARDS is diminished and need for respiratory support is also diminished?
MWinMD profile picture
In addition to the shorter hospital stay, ~30% fewer deaths (if the statistical trend, p = .06) holds, is nothing to sneeze at (pardon the pun).
A lot of people do not know that Chinese scientists(not the authoritarian Chinese government) isolated and sequenced SARS-COV-2 and shared it with the world. GILD then took this info, and was able to test Remdesivir, a failed drug for Ebola, and start manufacturing and clinical testing. 2 days ago, FDA gave them emergency approval, all in approx 6 months.They should be thanked, instead of criticized. They are giving away the first 1.5 M doses; after that they have every right to make a "reasonable" profit. Finally, assuming more effective and convenient drugs enter the market in under two years and/or a vaccine, they will have a short period to recoup their costs. They should be thanked for taking a lot of risk, and their proactive effort.
Biotech Beast profile picture
I agree GILD deserves praise for the rapid response, all the effort and risk taken on in scaling up remdesivir production, and the free courses of therapy. GILD knows if it came out with clear pricing of "$2000 a course" all the good deeds would be forgotten. Apparently remdesivir is worth $4500 according to the ICER.
how did Gilead use a RNA sequence to make and test this drug --- answer they didn't. They knew it was a coronavirus - they could test it on other corona viruses in lab and the actual covid19 in tissue culture but they did not use the DNA/RNA sequence to make the drug
Gild definitely has a plan for monetizing remdesivir. For the developed countries the price will be referencing how much medical savings the remdesivir can bring, for the developing countries the price will be how much people there can afford. The total sum is not going to be clear until some time later, but clearly some has already been priced in the stock price.
Biotech Beast profile picture
Yes, there is definitely something priced in on remdesivir if you look at the stock year-to-date, but it can go higher or lower based on whether the market likes what it is hearing on remdesivir.
Can you estimate a range? Thanks
Biotech Beast profile picture
Well we aren't going back to $62-$63 now I don't think. The options I see are as low as ~$70 if remdesivir ends up being priced much cheaper than expected or a competitor drug looks even better or something like that. On the high side the drug has repeatedly made moves towards $85 in recent weeks, although it barely made it to $84, but I think that would be a near-term target if we get a bit of clarity on pricing which is encouraging. So up or down about $7 from current prices seems like a likely range to me looking at the chart, others will use different strategies like financial models, analysts certainly will.
The Chinese government is doing their usual ploys - cheating, stealing, claiming they own it. When anyone comments on it, threaten them, retaliate. The rest of the world needs to wake up and see them for who they are -power hungry thugs. Bullies. Stop pretending they can be trusted.
in this case any country can steal a patent for their use. Its allowed even in the US.n
any government can use a patent if the national interest is at stake:

Government patent use law is a statute codified at 28 USC § 1498(a) that is a "form of government immunity from patent claims." Section 1498 gives the federal government of the United States the "right to use patented inventions without permission, while paying the patent holder 'reasonable and entire compensation'
OLDMUSKIE profile picture
Here's a fact. In the past, China has freely allowed Chinese companies to widely produce and sell counterfeit copies of high profile drugs, such as atorvastatin. These materials have been sold both in China and abroad, flagrantly violating any overarching intellectual property rights. Regardless of any rhetoric to the contrary, they allow this to happen on a large scale. I don't see how Gilead or the US can possibly stop them from doing it now, when the stakes appear to be so much higher.
Biotech Beast profile picture
Yes, there is a discussion in the Fierce Biotech article concerning steps to address this issue.
"IP protection in China has long been criticized by the Western world and was cited as a reason behind the latest trade war President Donald Trump waged against the country. As part of the first phase of a broader trade deal (PDF), the White House recently signed with Beijing to resolve the dispute, China has promised to implement some American-style enforcement of drug patent rights. These include allowing for a preliminary injunction against a generic maker amid a patent fight."

I'm hoping cooperation wins and some sort of deal can be struck, but let's see.
@OLDMUSKIE China has approved 3 (out of 8 applied) patents of remdesivir by GILD in Feb. It will not make China look good if Chinese companies start to make it without license from GILD. The report of the approval of the 3 patents are behind the pay wall. But you can get the idea from the first few lines: www.caixinglobal.com/...
They can't even stop the US government except they would get reasonable pay back:

Government patent use law is a statute codified at 28 USC § 1498(a) that is a "form of government immunity from patent claims." Section 1498 gives the federal government of the United States the "right to use patented inventions without permission, while paying the patent holder 'reasonable and entire compensation'
Gilead board and CEO is afraid of the lawsuits that could be brought against them....Afterall ....They have a Fiduciary obligation to the Stockholders.
Biotech Beast profile picture
I don't know if we're really going to see any lawsuits here. The stock is up not down YTD, management have played a pretty good hand so far, they are negotiating a difficult situation quite well.
Thanks for the update, Biotech Beast. Great list of some of the issues being worked through. Hopefully, we can avoid the usual litany of complaints and arguments about the need to make money on this drug, and the competency of management. There are a huge number of issues to be figured out, before anyone will know what revenues to expect or what profit to calculate. These are some of the issues to be worked out:
1. What will each of the many production partners cost to produce the drug? I assume it will be less in India, more in the US and who knows in Pakistan.
2. What political headwinds Gilead faces in the US and elsewhere for any price above cost recovery? It will probably vary from country to country.
3. Whether or not China actually tries to steal the drug or decides to pay for its use.
4. The degree to which insurance companies and Medicare decide to reimburse for its use and the amounts to be paid.
5. The degree to which doctors and hospitals adopt the drug.
This is only a partial list. Many of these issues are completely beyond management's control. Instead of venting our frustration at the lack of certainty, We all need to shut up and see what unfolds.
Thanks, again for a concise update.
You are correct. Seems posters on SA assume that Gilead can simply give the Drug away......not so they have a Fiduciary responsibly to their share holders to make money on the Drug .
Biotech Beast profile picture
Thanks, edilkes, for your comment and listing some of the issued faced here. Good luck with any position!
@George eFF "they have a Fiduciary responsibly to their share holders to make money on the Drug"

Do you have any legal precedent that backs up that claim, such as a lawsuit against a company that gave away products or patents for the public good?
Michael Dolen profile picture
I'm glad $GILD is not providing details on remdesivir monetization model. You realize that no matter what they say, it will be criticized and attacked?

Better to not say anything at all.

We will learn the answer ourselves in later quarters, based on numbers in the 10-Qs.
Biotech Beast profile picture
They are between a rock an a hard place though, yes they will be criticised but they are also getting some push back from the markets due to the uncertainty. Many don't want to wait til 30+ days after the quarter to know what is going on with remdesivir.
Biotech Beast profile picture
I'm not big on COVID-19 conspiracy theories. Do you really believe that stuff?
Has anyone ever commented on the political finesse of Gilead? All eyes have been on the company. They cannot go into am earnings release and tell investors how they’re going to make billions on it. Obviously it’s frustrating not knowing. But clearly they’re moving towards setting up the revenue stream both here and abroad. I hold no position in Gilead as an option player. But think broadly not just short term revenue with Gileads moves. The revenue is going to come. They’re avoiding the PR backlash of making money when so many people are forced to stay home. The revenue will come quietly, away from the big eyes of social-justice warriors.
We hope. It is reasonable to make a profit.
It's a fine line they are treading between keeping shareholders appeased and also the general public. No matter what price point they eventually set, if it's not completely free, some citizens will be upset given that the govt contributed some funds to the initial research with RDV. I think they have so far played their hand very well, with the exception of the orphan drug status application, which was quickly rescinded. Investors are growing impatient, but it is pretty obvious that they plan to generate substantial profit from licensing and manufacturing this drug. Unfortunately, as you stated, they can't out and out say this. Hopefully, investors are keen enough to read between the lines. The stock has already risen >20% in less than two months' time. Finalized data results will be released soon, as well as approval of pipeline drugs, and more information on RDV pricing and potential revenue. It appears that this stock has nowhere to go but up given all the good news.
Biotech Beast profile picture
Thanks hbcf, for you comment. Certainly GILD is worried about a backlash, but it has to balance that with what shareholders want and what analysts want (in order to remain bullish/issue upgrades). I think GILD has shifted the balance slightly towards the shareholder, but it will continue to do it some subtly to avoid backlash.
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