Gilead's Rating Upgraded on Potential Coronavirus Drug Sales

Shares of biotech major Gilead Sciences GILD gained 1.56% after brokerage firm SVB Leerink upgraded the stock to Outperform from the previous rating of Market perform.

The upgrade was primarily based on the inclusion of first revenue and profit contribution from Gilead’s much-touted experimental coronavirus treatment, remdesivir. In addition, incorporation of product opportunities from the recently announced collaboration with Arcus RCUS led to the upgrade.

The firm projects annual peak revenues of $7.7 billion for remdesivir in 2022.

Per the firm, it seems more likely that the product will be sold for both commercial use and government stockpiling. While the company has donated the approximately 200,000 course supply of remdesivir to governments, it is expected to announce pricing in the forthcoming weeks and commence commercial sales in the second half of the year. Stockpiling sales could begin in late 2021 after remdesivir production is increased. The brokerage firm assumes the commercial price of remdesivir to be $5,000/course in the United States, $4,000/course in Europe and $2,000/course in other markets.

The brokerage firm also forecasts sales of more than 1 billion from the Arcus products and believes that the collaboration provides Gilead critical mass in oncology with a diverse and synergistic pipeline.

We note that Gilead has been in the news from the onset of the year due to remdesivir. The company recently reported mixed results from a late-stage study on investigational antiviral remdesivir in hospitalized patients with moderate COVID-19 pneumonia. Data showed that patients in the five-day remdesivir treatment group were 65% more likely to have clinical improvement at day 11 compared with those in the standard-of-care group.

However, the odds of improvement in clinical status with the 10-day treatment course of remdesivir versus standard of care alone were favorable but did not attain statistical significance. We remind investors that the FDA granted remdesivir an Emergency Use Authorization for the treatment of hospitalized patients with severe COVID-19, given the severity of the pandemic. Remdesivir is currently approved in Japan as a treatment for patients infected with COVID-19.

Currently, there are no FDA-approved treatments for the severe illness caused by SARS-CoV-2. The pharma/biotech sector is running a race against time to come up with treatments and vaccines to cure the contagion.

Gilead’s shares have rallied 15.1% in the year so far compared with the industry’s growth of 7.9%. In fact, its remdesivir is pioneering the race for a possible treatment of this deadly virus.

 

While a potential approval of remdesivir will be a boost, there is uncertainty regarding the drug’s profitability in the long run. Moreover, the drug might not generate returns once a vaccine is out.

Meanwhile, the Arcus collaboration provides Gilead access to the former’s clinical and preclinical pipeline of immuno-oncology product candidates that target critical biological pathways. Immuno-oncology promises potential and possible approval of any candidate will be beneficial for Gilead.

Gilead is looking to diversify its business as the HCV business has lost sheen and the HIV business faces stiff competition from ViiV Healthcare, a joint venture of Glaxo GSK and Pfizer.

Separately, Gilead and partner Galapagos NV GLPG announced 52-week results from the phase 3 FINCH 1 and FINCH 3 studies of filgotinib, which is an investigational, oral, selective JAK1 inhibitor, in adults with moderately to severely active rheumatoid arthritis (RA). The data demonstrated sustained efficacy and a consistent safety profile with up to 52 weeks of filgotinib treatment across RA patient populations. A potential approval will bode well for the company.

Gilead currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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