Gilead Sciences, Inc. (NASDAQ:GILD) Expansion Plans & $1000-Miracle Hepatitis C Drug Sovaldi

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By Joseph Carducci on October 6, 2014 BioPharma, Company

Gilead Sciences, Inc. (NASDAQ:GILD) Q3 earnings release is on October 28, 2014. Many question Gilead Sciences, Inc. (NASDAQ:GILD)’s “$1000 wonder drug” for Hepatitis C. Analysts are expecting the company to post strong earnings.

The new strong earnings report is anticipated due to the wonder drug Sovaldi which has been shown to cure hepatitis C. In addition to this drug, the company plans to get another drug approved by the end of the month too. During the earnings call, analysts will most likely ask questions on the progress of this new drug. If an announcement can come out before earnings call, the stock may rally as the earnings date approaches.

Sovaldi has some cost-issues. The drug costs $1,000 per pill, and requires twelve weeks to be effective. At a cost of over $84,000 per treatment (Bloomberg), the drug has caused controversy and inquiry from pharmacy benefits managers who question the price point. Even patients undergoing the treatment have opted to wait for further discoveries to be made, as their medical insurance cannot cover the cost of outrageous treatment costs.

Despite expensive treatment costs, Andrew Berens, senior healthcare research analyst at Bloomberg and FBR Capital analyst believes the company’s raised his estimate of Sovaldi’s sales to $2.24 billion from his prior guidance of $1.94 billion stating

Many believe if Gilead is able to sell the drug in low income countries at a lower cost, they should be able to bring the same price to market in the United States. This price segmentation tactic is a common economic tactic employed by monopolists wishing to gain the maximum price per customer segmentation. Over 150 million people have life threatening hepatitis C, mostly in the Central, East Asia and North Africa region and 500,000 people die every year according to the World Health Organization (Source). Safe guards would be employed to make sure that the drug wouldn’t be resold outside of those affected countries, if a deal were to go through.

Nick Francis, a PR representative at Gilead, the world’s biggest maker for HIV Treatments validates the concept of tiered-pricing and customer segmentation:

“Providing treatment in resource-limited settings presents complex challenges, and we will work with partners in multiple sectors around the world to ensure our access programme reaches as many patients as possible”

The company faces patent issues in India, and may have difficulty entering the market since the country doesn’t give monopoly to pharmaceutical companies who discover cures based on existing known compounds. This deterrence has made it difficult for any existing pharmaceutical company to be financially motivated to bring their discovery into 3rd world countries.

Sanford Bernstein believes this year alone the drug can reach $6.7 billion in sales. In the last 3 weeks of 2014 alone, sales of Sovaldi reached $139 million. Competitors racing to find a cure for hepatitis C includes Johnson & Johnson, AbbVie, Merck & Co.