Gilead Sciences Inc.
) pricing of its hepatitis C virus (HCV) drug, Sovaldi, came
under the scanner leaving investors jittery and sending the share
price down about 4.6%. Gilead received a letter from the
Congress' Committee on Energy and Commerce raising concerns about
the pricing of the drug.
Sovaldi was approved in December last year, as a combination
therapy for treating patients suffering from HCV. The drug was
granted Breakthrough Therapy designation in the U.S. Gilead
priced its potential blockbuster drug at $84,000 per treatment,
which as per the U.S. lawmaker is beyond the affordability of
most patients even with public or private insurance cover.
Moreover, the lawmakers are concerned that if the drug is
prescribed with other treatments, the cost will go up even
further. Considering the fact that the prevalence of hepatitis C
is higher in low-income and minority patients, the pricing policy
from Gilead has come under severe criticism.
The letter has raised several questions including the methodology
used by Gilead for the drug's pricing and the extent to which the
company is providing discounts to lower-income patients. Gilead
has time until Apr 3, 2014, to respond to the questions raised in
Sovaldi's approval was a milestone event for Gilead. The drug is
expected to not only boost the company's top line significantly
but also to strengthen its position in the lucrative HCV market.
Most importantly, with the approval of Sovaldi, the duration of
therapy for HCV patients comes down to a minimum of 12 weeks as
opposed to the current standard of care treatment of up to 48
weeks. As per Centers for Disease Control, around 3.2 million
people are suffering from HCV in the U.S.
Sovaldi is off to a strong start and recorded sales of $136.4
million in its first few days in the market in the fourth quarter
of 2013. We believe the drug has multi-billion dollar sales
potential. At present, investor focus will remain on Gilead's
response to the questions raised in the letter. Last year,
Johnson & Johnson
) Olysio in combination with peg-IFN and ribavirin was also
approved in the U.S. for treating chronic HCV patients.
Gilead, a biopharmaceutical company, carries a Zacks Rank #1
(Strong Buy). Some other stocks worth considering in the same
Alexion Pharmaceuticals, Inc.
). Both stocks carry a similar bullish rank.
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