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Can Gilead Make Money From Its COVID-19 Treatment Remdesivir?

In this Fool Live video, healthcare and cannabis bureau chief Corinne Cardina and longtime Motley Fool contributor Brian Orelli discuss remdesivir, the antiviral from Gilead Sciences (NASDAQ: GILD), which is one of the treatments President Donald Trump received. The big biotech donated its initial stock of the drug, leading many investors to ponder whether Gilead can make any money from it. They also discuss the potential for combination treatments, which would lessen the possible impact of competition from other classes of drugs, such as monoclonal antibodies.

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Corinne Cardina: Let's talk about Gilead. Gilead Sciences has been making headlines for a while now. This is a $79 billion market cap company. They are based in Foster City, California. They were founded in 1987, so they're not new. Their recent strategy has been to make acquisitions that build on its existing portfolio. They just announced Immunomedics (NASDAQ: IMMU), they're buying that for $21 billion. It does pay a dividend that's yielding a little over four percent right now. Gilead has a lot of things on the market. They have a whole HIV franchise, both treatments and prevention, hepatitis C virus, hepatitis B, and hematology/oncology. They brought in $5.1 billion in product sales in the second quarter of its fiscal year 2020. That represents a 10 percent decrease from the same period last year. A lot of these drug companies have been battling a lot of headwinds from the pandemic during that second quarter. Gilead's pipeline is focused on oncology, viral diseases, and inflammatory diseases. That brings us to remdesivir. This is an investigational antiviral treatment that was initially developed for the treatment of Ebola virus, but it did not meet efficacy endpoints conducted during an Ebola outbreak. The FDA gave Gilead emergency-use authorization on May 1st specific to COVID-19 for remdesivir.

Gilead then announced that it was donating 1.5 million vials of this drug. The EUA has allowed doctors to administer remdesivir to certain patients despite it not having cleared the hurdles usually required of drugs for FDA approval. Gilead is conducting two phase 3 clinical studies to evaluate the safety and efficacy of two different dosing durations; there's five days, there's 10 days of remdesivir specifically in adults with COVID-19. Both of these studies have presented their initial results and they're going to be presenting results from their expansion phases soon, so we'll be keeping an eye on that. They also have some additional studies going on. They have a phase 2, 3 clinical trial investigating the use of remdesivir in pediatric patients with COVID-19, that started in June. Gilead is working with Roche to test the combination of remdesivir with an anti-inflammatory drug in patients with severe COVID-19 pneumonia, that also started in June. Brian, we know that Gilead has donated a large chunk of this medicine then it disclosed that it priced the drug at one level for the government, one level for insurers, lots of pricing elements in play there. But it's said that its investment in the drug could exceed one billion dollars. That's its own money that it's put in to this drug this year. Is this company making any financial gains from this treatment?

Brian Orelli: I did some back-of-the-envelope math and the price of the five-day treatment is $2,340 and then the higher prices is $3,120. So if you do a 50/50 split on there, they need like 366,000 patients to cover the one billion in costs, and I ignored the manufacturing costs so they need a little bit more than that. They donated 1.5 million doses which, at five days, that's 300,000 patients, and they already went through or are finishing up that stockpile right now. I think that getting 366,000 more patients is probably going to be pretty easy. I think that will definitely cover their costs. How much profit are they going to make? It probably depends on how long the pandemic goes on.

Corinne Cardina: Great point. Let's talk a little bit more about this antiviral drug. What do we know about remdesivir and how might the progression of antibody-based treatments impact this drug's market share, if you'll call it that, it's an antiviral which is different from antibody.

Brian Orelli: The way it works is that it blocks the virus from copying its genetic material, so it's an RNA virus. There's this thing called RNA dependent RNA polymerase, you make more RNA from the RNA, so it blocks that protein. That's the reason why the virus can't replicate. Since it works differently, I think that it's pretty clear that you can have a combination of treatments. So I don't think that they would necessarily be competing with the antibody treatments. I think they're currently being tested together and I think that it's likely that the combinations would work better than the individual, than each one of them on their own.

Corinne Cardina: Yeah. It'll be interesting to see what happens.

Brian Orelli: Of course, we know Trump got both.

Corinne Cardina: Correct.

Brian Orelli, PhD and Corinne Cardina have no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool recommends Immunomedics. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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