Gilead Prices Remdesivir Above Our Expectations

We're raising our Gilead GILD fair value estimate to $85 per share from $83 following the firm's pricing announcement for SARS-CoV-2 antiviral remdesivir. Gilead has announced prices of $3,120 (for U.S. commercial plans) and $2,340 (for developed market government payers, including the U.S.) for a five-day treatment course. This is significantly above our previous estimate of $1,000 per treatment in the U.S., both because of the higher price tag in the U.S. and because this price carries over to other developed countries, which typically see cheaper prices for drugs.

We have now boosted our remdesivir price assumption to $2,340 as a treatment in developed markets (with a 100% probability of approval) and $1,000 per stockpiled treatment course (with a 40% probability of stockpiling). We estimate that roughly 1.7 million patients could receive commercial drug in the second half at the five-day dosing schedule, using Gilead's estimate of total supply for 1 million patients by the end of 2020 at the 10-day dosing schedule (roughly 2 million patients at a five-day dosing schedule, minus the first 1.5 million doses, or around 300,000 courses, that were donated and are still being distributed to states in need by the federal government). Based on Gilead's expected manufacturing run rate by the fourth quarter of 2020, we think there could be enough remdesivir to treat an additional 6 million patients in 2021, which is in line with Gilead's plan to have "many millions more" doses in 2021. Together, these assumptions lead to $2 billion in remdesivir sales in 2020, followed by a peak of $3 billion in 2021 as treatment and stockpiling could both contribute to demand. Remdesivir remains an example of Gilead's innovation in the area of infectious diseases, but due to our expectation of the drug's short window of cash flow generation, the firm's HIV portfolio and immunology and oncology pipelines remain the key support for the firm's wide moat.

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