Disclosure: I’m long Gilead Sciences, Inc. (GILD).
Share price as at April 1, 2015: $97.72.
Gilead say they are a “… research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need.” (from the 10-K). Pure “bio” companies can make things like stem cells or complex proteins that are hard for anyone else to make (see Biosimilar on Wikipedia). Producers in India, China and Bangladesh are capable of making Gilead’s big sellers or the intermediates they can be made from. Gilead have the same reliance on patents as any other pharma innovator, and similar risk, except for the unusual attack from AbbVie’s controversial combination-finding model.
About this piece
Investors who are new to Gilead might like to read from “Litigation regarding Sofosbuvir” (below) first, to see if they are comfortable with the risk and with their ability to assess it.
My simple explanations may bring more pain than joy to well informed readers, who might prefer “Gilead Sciences – the charts” (wordpress.com), where I’ve cut nearly all the text.
I cover many aspects of the business, with a lot about hepatitis C but not much about HIV.
I start with a table and chart for customer concentration, then break down revenue by geography, type and product, which leads into product descriptions, the pipeline, and more.
Revenue by geography
Revenue by type
This is overwhelmingly product sales. The other category is Royalty, contract and other revenues.
Revenue by product
(The spreadsheet formulas are shown here.)
Harvoni was only on sale for a short time in 2014, with approval from the FDA in October 2014 and from the European Commission in November 2014. Quoting from “Gilead Sciences’ (GILD) CEO John Martin on Q4 2014 Results – Earnings Call Transcript” Feb. 3, 2015 (www.seekingalpha.com) –
“prescription data at year-end indicate that for each Sovaldi patient, three patients started therapy with Harvoni.”
It’s hard to estimate 2015 sales of Harvoni by extrapolating from the short period of sales in 2014, partly because –
“Although after the launch of Harvoni we saw payor restrictions increasingly in place across all patient types and especially for those with lower fibrosis scores.” (the Seeking Alpha transcript, linked to above)
and there has been news in 2015 which affects price and volume. Payor restrictions have been eased, but in return for lower pricing. If you want to estimate 2015 sales of Harvoni, you may be better off looking at the weekly prescriptions and multiplying by the average price, if you can estimate it, but the prescription data I found is U.S. only and might not catch every prescription.
In the two pie charts that follow, I set Harvoni sales equal to Sovaldi sales in 2014, to give a view of the product concentration which does not grossly under-represent Harvoni. The simple kludge is not intended as a projection, or as an adjustment to 2014 results. Some Harvoni sales will replace Sovaldi sales, and the charts take no account of that.
I’ve quoted selectively from a list on page 6 of the 10-K PDF. Lots of crucial info is omitted to keep the length down. I put in the percent of Total product sales I calculated, when the sales of the product were disclosed.
• 4.89% ~ Stribild is an oral formulation dosed once a day for the treatment of HIV-1 infection in treatment-naive adults. Stribild is our third complete single tablet regimen for the treatment of HIV and is a fixed-dose combination of our antiretroviral medications, Vitekta, Tybost, Viread® and Emtriva® (emtricitabine).
• 5.02% ~ Complera/Eviplera is an oral formulation dosed once a day for the treatment of HIV-1 infection in adults.
• 14.18% ~ Atripla is an oral formulation dosed once a day for the treatment of HIV infection in adults. Atripla is our first single tablet regimen for HIV intended as a stand-alone therapy or in combination with other antiretrovirals.
• 13.65% ~ Truvada® (emtricitabine and tenofovir disoproxil fumarate) is an oral formulation dosed once a day as part of combination therapy to treat HIV infection in adults.
• 4.32% ~ Viread is an oral formulation of a nucleotide analog reverse transcriptase inhibitor, dosed once a day as part of combination therapy to treat HIV infection in patients two years of age and older.
• Emtriva is an oral formulation of a nucleoside analog reverse transcriptase inhibitor, dosed once a day as part of combination therapy to treat HIV infection in adults.
• Tybost is a pharmacokinetic enhancer dosed once a day that boosts blood levels of certain HIV medicines.
• Vitekta is an oral formulation of an integrase inhibitor, dosed once a day as part of combination therapy to treat HIV infection in adults without known mutations associated with resistance to elvitegravir, the active ingredient of Vitekta.
I’ll start with some info about the seven major genotypes of HCV viruses, after describing “genotype”.
Every person has a gene for eye color. There’s an allele for brown eyes, an allele for green eyes, and an allele for blue eyes. Another example of an allele is the allele for lactose intolerance. A person’s genotype is their complete set of alleles. (I’m ignoring details like the existence of dominant and recessive alleles.)
Although virus reproduction is very different, they still have genes, alleles, and genotypes. Genotypes are grouped into classes, and HCV is currently divided into seven major genotypes, numbered 1 to 7 (according to Wikipedia, but most sources I’ve seen only mention 1 to 6). Genotype 4 is broken down into 4a, 4b etc. up to 4j, while genotype 5 has no sub-types (I’m not sure that’s up to date).
Approximate relative prevalence of genotypes in the U.S. –
Genotype 1 ~ 70%
Genotype 2 ~ 20%
Other genotypes ~ Wikipedia claims about 1% for each other major genotype, presumably leaving about 5% for all the minor genotypes.
Genotype 1 is also the most common genotype in South America and Europe.
Genotype 1 is subdivided into genotype 1a and genotype 1b, while genotype 2 is subdivided into genotypes 2a, 2b, 2c and 2d. I assume that when it’s stated that a product can be used for treating genotype 1, that includes the sub-variants. The 10-K for 2014 has “genotype 1” several times in connection with HCV, and no instance of “genotype 1a” or “genotype 1b”.
Sources: “Hepatitis C” (wikipedia.org), Genotype (wikipedia.org), “Hepatitis C” (hepatitiscentral.com – I’m not sure who they are), What are Genotypes? – Definition, Examples & Quiz (study.com).
For more simplified science, find “Sofosbuvir-aka-Sovaldi bio-chemistry”, below. I also write about “Compensated and decompensated cirrhosis of the liver”, below.
• 8.69% ~ Harvoni is an oral formulation of the NS5A inhibitor with a nucleotide analog polymerase inhibitor dosed once a day for the treatment of HCV genotype 1 infection in adults. … Harvoni is also indicated for certain patients … those with HCV/HIV-1 co-infection.
• 42.2% ~ Sovaldi is an oral formulation of a nucleotide analog polymerase inhibitor dosed once a day for the treatment of HCV as a component of a combination antiviral treatment regimen. … Sovaldi’s efficacy has been established in patients with HCV genotypes 1, 2, 3 or 4 infection (in United States and Europe) and genotypes 5 and 6 infection (in Europe), including … those with HCV/HIV-1 co-infection.
• (4.32%, listed under HIV) Viread is an oral formulation of a nucleotide analog reverse transcriptase inhibitor, dosed once a day for the treatment of chronic HBV in adults with compensated and decompensated liver disease. … Viread is also approved for the treatment of HIV infection.
• Hepsera® (adefovir dipivoxil) is an oral formulation of a nucleotide analog polymerase inhibitor, dosed once a day to treat chronic HBV in patients 12 years of age and older.
• Zydelig is a first-in-class PI3K delta inhibitor, in combination with rituximab, for the treatment of certain blood cancers.
• 2.43% ~ Letairis (ambrisentan) is an oral formulation of an endothelin receptor antagonist (ERA) indicated for the treatment of pulmonary arterial hypertension (PAH) (World Health Organization (WHO) Group 1) in patients with WHO Class II or III symptoms to improve exercise capacity and delay clinical worsening.
• 2.08% ~ Ranexa® (ranolazine) is an extended-release tablet for the treatment of chronic angina.
• Lexiscan®/Rapiscan® (regadenoson) injection is indicated for use as a pharmacologic stress agent in radionuclide myocardial perfusion imaging (MPI), a test that detects and characterizes coronary artery disease, in patients unable to undergo adequate exercise stress.
• Cayston® (aztreonam for inhalation solution) is an inhaled antibiotic for the treatment of respiratory systems in cystic fibrosis (CF) patients seven years of age and older with Pseudomonas aeruginosa (P. aeruginosa).
• Tamiflu® (oseltamivir phosphate) is an oral antiviral available in capsule form for the treatment and prevention of influenza A and B. Tamiflu is approved for the treatment of influenza in children and adults in more than 60 countries, including the United States, Japan and the European Union.
• 1.59% ~ AmBisome® (amphotericin B liposome for injection) is a proprietary liposomal formulation of amphotericin B, an antifungal agent to treat serious invasive fungal infections caused by various fungal species in adults.
• Macugen® (pegaptanib sodium injection) is an intravitreal injection of an anti-angiogenic oligonucleotide for the treatment of neovascular agerelated macular degeneration.
The data is from counting blue bars on Gilead’s pipeline page. I’m not sure what a blue bar means, e.g. a blue bar completely across Phase 2 suggests the phase is complete, but all the blue bars go all the way across. I’ve emailed Investor Relations and not seen a reply. (I failed to draw a definite conclusion by looking into GS-4774, which has blue bars up to Phase 2, and is the subject of “Safety and Efficacy of GS-4774 in Combination With Tenofovir Disoproxil Fumarate (TDF) for the Treatment of Subjects With Chronic Hepatitis B and Who Are Currently Not on Treatment” (clinicaltrials.gov).)
There’s a statement at the top of the ‘pipeline’ page –
“Safety and efficacy of the following compounds have not been established.”
In some cases, Gilead won’t get 100% of any profit, for example –
“Complera/Eviplera is a fixed-dose combination of our antiretroviral medications, Viread and Emtriva, and Janssen’s non-nucleoside reverse transcriptase inhibitor, Edurant (rilpivirine).”
Some of the revenue from that would go to Janssen Pharmaceuticals (and when other companies use a Gilead product in a combination, it’s good news, rather than competition).
The pipeline page omits anything pre-clinical.
On Gilead’s site, the Earnings page has the PDF “Fourth Quarter 2014 Earnings slides” which includes diagrams for the pipeline which I prefer to the diagrams on the pipeline page, because it’s clear which phase a candidate is in. The pipeline page should be more up to date, though. The Earnings page also has the Q4 results and guidance for 2015, and audio for the earnings call.
I’ve reduced Gilead’s page showing year, picture and name, to number of approvals in this chart –
The numbers add up to 22. The trendline I added should not be taken too seriously, but the four approvals in 2014 are probably above any reasonable trend, and a fall looks fairly likely. The R-squared of 0.416 means the trend line only explains 41.6% of the variation. The number of approvals in a year says nothing about the commercial potential of each of them.
Recent Phase 3 results for TAF (for HIV)
See “Gilead Announces Phase 3 Results for Investigational Once-Daily Single Tablet HIV Regimen Containing Tenofovir Alafenamide (TAF)” (investors.gilead.com).
The TAF regimen being tested was found to be “Non-Inferior” for treating HIV, with less side-effect damage to the liver and bones. The reason why TAF is needed is that HIV patients are living longer than previously, increasing the need for treatments which cause less damage. The trial subjects were adults with HIV-1 infection who had not previously received treatment.
Patent expiration timeline
Shareholders will know that Gilead have a good patent expiration timeline, with the big sellers Sovaldi and Harvoni not due to expire until 2029 and 2030. The expiry of Atripla and Truvada in 2021 is not so far off but is not imminent either. There’s a full list on page 17 of the 10-K for 2014 PDF. My table below shows the 2014 sales. It misses out the products in the two ‘other’ categories (in the product sales breakdown), but they only accounted for 1.04% of product sales. I compiled the table by combining the disclosures for sales per product, with the patent expiry table. I’ve shown a simplified (or kludged) version, because it only gives the date of U.S. expiry, along with global sales.
“For our product that are single tablet regimens (e.g., Truvada, Atripla, Complera/Eviplera and Stribild), the estimated patent expiration dates provided correspond to the latest expiring compound patent for one of the active ingredients in the single tablet regimen.” (10-K for 2014)
The Harvoni combination gets it’s expiry dates based on the latest expiries of its two components. The combination only has patent applications and pending patents (there’s more on that later).
The next chart tries to show the benefit of the U.S. expiry years, compared to the assumption of an equal amount of U.S. sales expiring every year (expiring with the patents), from 2015 to 2030.
The charts are only meant to give a very rough view, because various assumptions and fudges were needed due to the lack of detailed data. I assumed 2014 sales would repeat until patent expiry, followed by zero sales. I split the ‘rest of the world’ between U.S. and E.U. I did not adjust for Harvoni’s launch date, and because of that the timeline should be better than in the chart.
What counts in the chart is that the brown line is above the straight blue line, which means that annual sales are greater than they would be if the effect of expiry was spread evenly throughout the period.
The benefit is not so big for the E.U., but E.U. product sales were less than a third of the U.S. sales in 2014.
One thing that seemed certain enough was the strength of the IP, because an expiration date tends to imply that a patent protects a product until expiry.
Litigation regarding Sofosbuvir
While the risk from the patent disputes may be hard for some people to judge (including myself), it should not be forgotten that nearly half of Gilead’s revenue in 2014 was not from hepatitis C (the disputed area), Gilead have a strong pipeline, and the valuation is relatively low.
Details of Gilead’s litigation start on page 18 of the 10-K PDF.
Sometimes, the U.S. Patent and Trademark Office (USPTO) notices that the claims of a pending patent clash or “interfere” with a patent that’s already been granted. They told Gilead about interference from pending patents for a class of compounds which includes metabolites of sofosbuvir, the drug in Gilead’s Sovaldi and one of two ingredients in Harvoni. (Metabolites are the result of the body’s metabolism turning one compound into other compounds. Technically, sofosbuvir (Wikipedia) is a “protide prodrug”, which is metabolized to an active antiviral.) The pending patents for the class of compounds belong to Idenix Pharmaceuticals, Inc.
In cases of interference, it was necessary to establish who was first to invent (under the law at that time). In March 2013, the USPTO Patent Trial and Appeal Board decided in favor of Gilead. The reason was that Idenix had not given instructions on how to make the disputed compounds. After that, the USPTO board decided Pharmasset (which Gilead acquired) were the first to invent sofosbuvir, because Idenix couldn’t prove they thought of it first, or identified the structure of the compounds or any use for them, or tested them, in the relevant time period. Idenix has appealed to the U.S. District Court for the District of Delaware. That’s only the “First Idenix Interference”. In the “Second Idenix Interference”, Gilead have won the first phase.
(The law has changed, as most of the Leahy-Smith America Invents Act (Wikipedia) became effective on September 16, 2012 and March 16, 2013. America’s principle of “first to invent” was out of step with the rest of the world, which operates on “first to file”. It’s easy to see which filing date was earlier, but the content still needs to be examined, for example to see if it described how to make a compound. The law does not affect previous patents, and it’s the pre-Leahy-Smith law that applies to Gilead’s patent disputes over sofosbuvir.)
The dispute has spread to other Idenix patents, such as ‘191 and ‘572, although patent numbers could be different because they are filed overseas. The dispute has gone on a world tour, with Idenix losing in Norway and the U.K., and withdrawing in China. A trial in Canada started in January 2015. A decision from a court in Düsseldorf, Germany, was expected in mid-March 2015. A trial will start in Sydney, Australia, in September 2015.
From the 10-K,
“Idenix was acquired by Merck in August 2014. While the acquisition does not change our view of the lack of merit in the claims made by Idenix, Merck has greater resources than Idenix and may therefore choose to fund the litigation at higher levels than Idenix.”
Litigation with Merck
From the 10-K for 2014 –
“In August 2013, Merck contacted us requesting that we pay royalties on the sales of sofosbuvir and obtain a license to U.S. Patent Nos. 7,105,499 and 8,481,712, which it co-owns with Isis Pharmaceuticals, Inc. We believe that Merck’s patents are invalid and are not infringed by” etc.
For more about Merck, find “Merck’s HCV pipeline” and the link “Merck’s hep C drug no longer a ‘breakthrough’”, below.
See also “Gilead Sciences: Clear The Dockets And Settle With Merck Already” by Small Pharma Analyst, Oct. 21, 2014 (seekingalpha.com). There are some good points in the comments about why Merck’s case is probably weak. It’s still true that judges don’t always decide correctly or as expected. Chemist357 pointed out that Merck’s provisional patents expired worthless. For a provisional patent to stake an invention date, the patent application had to be filed within 12 to 13 months.
Litigation with AbbVie, Inc.
USPTO (the U.S. Patent and Trademark Office) is likely to refuse a patent for a combination of two drugs which attack different vulnerabilities of the same pathogen, on the grounds that it’s an obvious thing to try. It’s not too surprising that Gilead has no patent for the combination of sofosbuvir and ledipasvir in Harvoni. More surprising is the granting of five patents for the combined use of the same two drugs to Abbvie. Instead of claiming their scientists had discovered the combination, Abbvie claimed it was the result of a virtual model. That seems to have been enough to convince USPTO that AbbVie’s combinations did not fail the test of obviousness.
You can find statements by Gilead starting at the bottom of page 20 of the 10-K PDF.
“We own published and pending patent applications directed to the use of combinations for the treatment of HCV, and, specifically, to the combination of ledipasvir and sofosbuvir. Certain of our applications were filed before the AbbVie Patents. For this reason and others, we believe the AbbVie Patents are invalid.
Accordingly, in December 2013, we filed a lawsuit in the U.S. District Court for the District of Delaware seeking declaratory judgment that the AbbVie Patents are invalid and unenforceable, as well as other relief. We believe that Abbott Laboratories, Inc. and AbbVie conspired to eliminate competition in the HCV market by falsely representing to the USPTO that they, and not Gilead, invented methods of treating HCV using a combination of ledipasvir/sofosbuvir. In February and March 2014, AbbVie responded to our lawsuit by filing two lawsuits” etc.
Obviously, “If a court determines that the AbbVie Patents are valid and that we have infringed those claims, we may be required to obtain a license from and pay royalties to AbbVie to commercialize sofosbuvir combination products.”.
I’ve included a few links –
“AbbVie (ABBV) Uses Patents To Ambush Gilead Sciences, Inc. (GILD)” by Mark Terry, Breaking News Staff, 11/13/2014 (biospace.com)
“Gilead Sciences Gets Ambushed By The Patent Troll, AbbVie” by Small Pharma Analyst, Nov. 12, 2014 (seekingalpha.com). With 325 comments, most of the arguments are likely to have been made already.
The Seeking Alpha piece prompted – ‘“Seeking Alpha” labels Abbvie a patent troll.‘ by Lawrence B. Ebert, November 12, 2014 (blogspot.co.uk), although it was the author Small Pharma Analyst and not Seeking Alpha who used the ‘troll’ label.
The Seeking Alpha article is long and highly informative. The biospace and Seeking Alpha articles both use the word “ambush”. Both authors expect the case to drag out over years. Small Pharma Analyst supports the “troll” label by explaining the obstacles to Abbvie commercializing a copy of Harvoni, which only leaves the extraction of cash from Gilead as the way to exploit the relevant patent claims. Although firms that specialize in “patent trolling” have faced some headwinds in recent years, the ‘trolling’ is not illegal. (For the basics of patent claims, see “How do I read a patent? – the Claims” (bpmlegal.com) and find the “motor vehicle” example.)
Gilead’s accusation of conspiring to eliminate competition is more colorful than you normally see in a 10-K. I can understand them being outraged, but fear of massive loss would also be consistent with the tone of the statement. Gregg H. Alton, an Executive VP, is a member of “the U.S. Government’s Industry Trade Advisory Committee on Intellectual Property Rights” (under Senior leadership), and the company has been through enough litigation that inexperience is not a likely factor. See Small Pharma’s article for more fairly extreme accusations in Gilead’s lawsuits.
About a lawsuit against AbbVie – “Gilead in 2013: AbbVie sought to eliminate competition and dominate market for HCV drugs” by James Love, July 16, 2014 (keionline.org).
You might not expect gas pedals to have much to do with drug combinations, but see “Is Chunky Monkey an Obvious Combination?” by Peter Pitts, 5.23.07 (spectator.org).
About obvious combinations and prior art, in order of increasing unreadability – the U.K. (genericsweb.com), the European Patent Office (epo.org), and USPTO (uspto.gov).
Litigation with generic manufacturers
This mostly concerns Teva Pharmaceuticals, over Tenofovir Disoproxil Fumarate, Emtricitabine and Fixed-dose Combination of Emtricitabine, Tenofovir Disoproxil Fumarate and Efavirenz, and you can find the details on page 21 of the 10-K PDF.
It’s an obvious tactic for a generics manufacturer to try to break patents. It’s less expensive than developing new drugs, but when patents are successfuly broken, the generics manufacturer has no monopoly on the benefit.
Doctors of the World
“Charity challenges Gilead’s European patent on hepatitis C therapy Sovaldi” (Ref: Bloomberg, The Guardian, CNBC, Doctors of the World – Médecins du Monde) by Joe Barber, February 10th, 2015 (firstwordpharma.com). Médecins du Monde claim that Sovaldi depends too much on a breakthrough at Cardiff University, and have filed a patent challenge with the European Patent Office. Médecins du Monde (Wikipedia) are a non-profit that provide medical care and campaign for equal access to healthcare.
Also in the piece, in January, India refused a patent for Sovaldi, implying that the inventive step was too small. I suspect their conclusion, because even if Gilead only tweaked a molecule as alleged, the effect of tweaking a molecule is not necessarily obvious. The tweak might not be easy to make, even if the chemical diagram does not change much. Both those points seem likely to be magnified when it’s only the metabolites that are active. Roche were an early leader in HCV, but their products were never good enough, which supports the view that success was not easy. The same applies to Bristol-Myers Squibb, who acquired key IP (see “Hepatitis C drug set to give Cardiff University financial boost” 12 January 2012 (bbc.co.uk)). If there was an obvious and easy way to build on the university research, it begs the question, why did the researchers at the university or at Bristol-Myers Squibb not make that last inventive step.
Awards for patent infringement
Awards in patent disputes are meant to compensate for lost profits and the extra costs incurred. That naturally includes backdated royalties. I’ve read that big awards for patent infringement are scaled back on appeal more often than not, but I can’t find a link which confirms that.
I googled “record patent awards” and the biggest I could see was “Jury Awards $1.67B to Drugmaker in Record-Breaking Patent Verdict” by Martha Neil, Jun 29, 2009 (abajournal.com).
Following that up – “Abbott Wins Reversal of J&J’s $1.67 Billion Patent Victory” by Susan Decker, February 23, 2011 (bloomberg.com).
The 2011 piece gives Abbott’s worldwide sales of Humira (the relevant product) at around $6.6 billion. If I assume the sales were the same in 2009, the ratio of award / sales = 0.2530303 or 25%. Although that’s for a record-breaking award (for patent infringement), the size of the annual sales would be a large factor. The ratio of award / sales is probably not record-breaking, but IMO it’s likely to be above average. 25% of sales is big when sales are big, but not likely to be a company-killer. Because pharma costs are mostly up-front, with high gross margins, an award like that does not look as bad as failing phase 3, not getting approval, or having very low sales due to a superior competing product, all normal risks for a pharma company.
I did not find another case where damages and the infringer’s sales were both reported, and the studies I found showed the academics had no interest in the relation between the two quantities. A single case is not much to go on but better than nothing.
The amount in a settlement depends on how the case develops, perceptions of the strength of a case and the likely size of an award, attitude, etc.
“Pfizer Reaches $2.15 Billion Protonix Accord With Teva” by Sophia Pearson, Susan Decker and David Voreacos, June 12, 2013 (bloomberg.com)
Assuming Teva and Sun’s sales equaled Pfizer’s lost Protonix sales, their annual sales were –
Settlement / Annual sales
= 2150 / 1094
That’s much higher than the award / sales of 25% for the Abbott vs J&J case.
Assuming the infringing sales only occured in 2008, 2009 and 2010 (the patent expired in January 2011) –
Settlement / Total sales (over the three years)
= 2150 / 3,282
= 0.6550 or 65.5%
It was a clear case of jumping in before expiry, and Pfizer’s lost sales really were evident in a lower sales figure. Generics manufacturer’s have smaller gross margins, and the settlement would have hurt. Abbott vs J&J seems more relevant, but it’s just one case.
This lists various IP deals, awards and settlements – “Patent/copyright infringement lawsuits/licensing awards“.
These academics claim to have figured it out – “Explaining the “unpredictable”: An empirical analysis of U.S. patent infringement awards” (PDF) by Michael J. Mazzeo, Jonathan Hillel, Samantha Zyontz, Accepted 2 March 2013 (kellogg.northwestern.edu). I’m not convinced that forward citations are a good proxy for the economic value of patents. I’d guess that applying the methods to cases could produce an endless stream of ‘cookie-cutter’ articles.
Sofosbuvir aka Sovaldi bio-chemistry
Some knowledge of the bio-chemistry should help when assessing competitors’ pipelines, because there are no sales figures to go on. This is meant for people who don’t know much of the science, and while I’ve made it simple, it won’t be as reliable as if I’d regurgitated the technicalities.
The hepatitis C virus (HCV) hijacks a host cell’s machinery to make copies of itself. The virus has a strand of RNA that codes for making proteins, and those strands of RNA need to be reproduced. Each strand of RNA is actually a chain of nucleotides, and a new strand of virus RNA is made by adding one nucleotide at a time to the end of a growing chain.
One way to stop or reduce the virus’s reproduction is to give it some fake nucleotides. That’s a tricky proposition, because the fakes have to be close enough to the real thing to be added to the chain, but they can’t be exactly the same because the whole point is that a chain which includes a fake does not work like a normal strand of virus RNA. The fakes also have to be very effective against virus reproduction compared to the harm they do to the patient.
In the body, Sofosbuvir is turned into metabolites which are “nucleotide analogs”, which means fake nucleotides.
RNA can be understood as a kind of template for building proteins, with the template being read one nucleotide at a time. The nucleotide analogs (the fake building blocks) are designed so that when one of them is read, it’s interpreted as a kind of end-marker, with the effect of saying “stop what you’re doing, we’re finished”. Getting technical, the end marker is called a “stop codon”, and when it causes the chain-building to stop, it’s called “RNA chain termination”.
The chain-building involves a thing called a polymerase. A polymerase is an enzyme that builds a polymer, “polymer” is the word for any kind of molecular chain, and DNA and RNA are both polymers.
NS5B is the Hepatitis C virus’s RNA polymerase, which it uses to replicate its RNA.
If you see Sofosbuvir described as a “nucleotide analogue inhibitor of HCV NS5 B polymerase”, you should now have some idea of what that actually means –
nucleotide analogue – fake building block with a sneaky “stop” sign.
inhibitor of … polymerase – stops the polymerase from finishing a long molecule (by putting an early “Stop!” sign in the template).
HCV – the hepatitis C virus
NS5B – the virus’s RNA polymerase, which it uses to replicate its RNA.
When I read “nuc”, I assume it’s short for “nucleotide analogue” and that it probably inhibits something vital for virus reproduction. “nuc”s are generally good for most genotypes, because all versions of a virus have to make use of the same four or five kinds of “building-block” nucleotides. They are good to have in drug combinations for HCV because they work across many genotypes and act differenctly to other kinds of antiviral. The more efficient a “nuc” is, the less need there is for combining it with drugs that cause severe side-effects. It wasn’t easy to get a good “nuc”, and getting a “nuc” as good as sofosbuvir or better, which is also different enough to be patented, will not be easy.
It’s harder for a virus to evolve resistance to a combination of effective anti-viral agents, because a mutation that gives resistance to one of them should not allow the virus to reproduce and spread the resistance, due to the effect of the other antivirals.
One more term. You might see “Uridine” in a description of Sofosbuvir, as in
“Uridine nucleotide analogue inhibitor of HCV NS5 B polymerase”
There are five kinds of nucleotides. Three of them occur in both DNA and RNA, but the nucleotides built around thymine are only in DNA, and the nucleotides built around uracil are only in RNA. Uridine is a kind of nucleotide analog built around uracil (well, not quite, because it’s a nucleoside, but I can’t explain everything). You don’t need to make every building block a fake, you just need to have at least one fake in a sequence often enough (and not at the end), and faking the uracil nucleotides is good enough.
I’ve missed a lot out, (ribosomes, positive sense RNA, messenger RNA, etc.) which you can tell if you look up the links.
Wikipedia: Nucleoside analogue, Nucleotide, RNA polymerase, Hepatitis C virus, Translation (biology).
Other sources: Nucleoside and Nucleotide NS5B Polymerase Inhibitors (medscape.com), Nucleoside/Nucleotide Analogues (emedicinehealth.com, about hepatitis B).
HIV and hepatitis C viruses make a number of different proteins by making them all in one long molecule, and then slicing the molecule into the parts they need. The slicing up is done by their protease enzymes. A protease inhibitor is an antiviral molecule which attaches itself to the protease enzyme and stops it from working. See “Protease inhibitors” (aidsmap.com).
Gilead have two HIV products which work in combination with protease inhibitors, and have a combination for HCV in Phase 2 which includes a protease inhibitor. (From the 10-K, slightly ediited – Fixed-dose combination of GS-9857, sofosbuvir and GS-5816 – GS-9857 is a pan-genotypic NS3 protease inhibitor being evaluated in combination with sofosbuvir and GS-5816 for the treatment of HCV.)
There’s an announcement from December 2014 titled “JANSSEN ANNOUNCES COLLABORATION WITH GILEAD TO DEVELOP PREZISTA®-BASED SINGLE-TABLET REGIMEN FOR THE TREATMENT OF PEOPLE LIVING WITH HIV”, which includes –
“If successfully developed and approved by regulatory authorities, this treatment would represent the first protease inhibitor-based STR and thereby continue Janssen’s commitment to providing its HIV products in more simplified dosing presentations.” (10-K for 2014)
(STR is probably “single tablet regimen”.)
Merck’s HCV pipeline
Of the three Hepatitis C candidates listed on Merck’s pipeline page, one is a combination in phase 3, and the other two are combinations in phase 2.
The phase 3 combo is of grazoprevir and elbasvir, each of which is oral and once-daily, and for treating chronic hepatitis C. The combo is an Investigational New Drug (IND), which only means the company has permission from the FDA to ship the drug across state lines before a marketing application has been approved. The 10-K has –
“MK-5172A, a once daily, fixed-dose, combination, chronic HCV treatment regimen consisting of MK-5172, grazoprevir, an investigational HCV NS3/4A protease inhibitor, and MK-8742, elbasvir, an investigational HCV NS5A replication complex inhibitor, began Phase 3 clinical trials in June 2014. MK-5172A is being investigated in a broad clinical program that includes studies in patients with multiple HCV genotypes who are treatment-naïve, treatment failures, or who fit into other important HCV subpopulations such as patients with cirrhosis and those co-infected with HIV.”
Elbasvir is described as a “HCV NS5A replication complex inhibitor”, which has some similarity to Gilead’s NS5A inhibitor ledipasvir, one of the drugs in Harvoni (the other is sofosbuvir, a NS5B polymerase inhibitor). Harvoni is on sale, but Gilead also have GS-5816, a pangenotypic NS5A inhibitor, and a combination with sofosbuvir is currently in Phase 3 clinical trials. AbbVie and Achillion each have a NS5A inhibitor In Phase 2 (AbbVie’s is ABT-530, and Achillion’s is ACH-3102).
The phase 2 entries on the pipeline page don’t have much detail. One has both grazoprevir and elbasvir, as for the phase 3 combo, and the other has grazoprevir without elbasvir. They both have MK-3682, which I describe later in this section.
From the news item “Interim Data from Proof-of-Concept Study of Merck’s Investigational Hepatitis C Treatment Grazoprevir/Elbasvir in Combination with a Nucleotide Inhibitor (C-SWIFT study) Presented at The Liver Meeting®” Sunday, November 9, 2014 (mercknewsroom.com),
“To date, no discontinuations due to an adverse event and no drug-related serious adverse events have been reported. Most adverse events were mild or moderate in intensity, with no apparent dose effect.”
I don’t know just how serious the adverse events were. It remains to be seen just how bad they’ll be in phase 3, and the effect on demand, pricing and sales if the combo gets through the remaining stages.
(This section is about Merck’s HCV pipeline, but I’ll mention that the pipeline page has a HIV candidate in phase 3 – “MK-1439 is an investigational orally available HIV non-nucleoside reverse transcriptase inhibitor (NNRTI) being evaluated for the treatment of HIV infection.”, with a link for the clinical trials. The HIV candidate is “investigational”.)
There are two relevant tables in “Is Merck Ready To Soar Or Flop? The Challenging Question Of Predicting Pipeline Potential” by Pharma Doc, Mar. 17, 2015 (seekingalpha.com). The tables compare Gilead’s Harvoni, Abbvie’s Viekira Pak (both on sale), and Merck’s MK-5172A aka Grazprevir/Elbasvir (in Phase 3). The data used is from phase 2 and phase 3 clinical trials. Taking into account Abbvie’s higher pill count and the side effects, Merck’s candidate seems to be slightly inferior to Harvoni, but better than Abbvie’s Viekira Pak. “GT1” means “genotype 1”, and the author seems to regard MK-5172A as being only good for that genotype, probably for a good reason, although the quote above from Merck’s 10-K included “patients with multiple HCV genotypes”.
The author is also hopeful about an HCV combination made possible by Merck’s acquisition of Idenix. It looks like the combo is MK-3682/MK-8742 (elbasvir)/MK-5172 (grazoprevir), the phase 2 candidate with the mild or moderate adverse events. It seems to be aimed across genotypes, and would compete with Gilead’s Sovaldi. The 10-K says very little except “The Company expects to begin Phase 3 studies in 2015.”, and does not give the combo a name. The component MK-3682 was acquired from Idenix, and it gets –
“MK-3682 is a nucleotide prodrug in Phase 2 clinical development being evaluated for potential inclusion in the development of all oral, pangenotypic fixed-dose combination regimens.” (Merck’s 10-K)
“prodrug” means it’s the metabolites which are active against viruses (as for Gilead’s sofosbuvir, aka Sovaldi).
“nucleotide” is also in common with Gilead’s sofosbuvir, which is described as a “nucleotide analog polymerase inhibitor” in the 10-K (nucleotides are described in “Sofosbuvir aka Sovaldi bio-chemistry”, above).
In other words, Merck’s MK-3682 looks like a “nuc”, and because of the adverse events it’s probably not as good as Gilead’s “nuc” (Sofosbuvir), even though the “adverse events were mild or moderate in intensity”.
Achillion’s HCV pipeline
The pipeline shows four compounds, two in phase 2, one in phase 1, and a compound between discovery and preclinical. Clicking the names gets more detailed information.
The first compound, in phase 2, is called ACH-3102. It’s an HCV NS5A Inhibitor, which Achillion claim is “second generation”. They also say it’s been “fast tracked” by the FDA, but I wouldn’t be surprised if technically it’s been given a Breakthrough Therapy Designation. There’s a pilot Phase 2 for the use of ACH-3102 in combination with Gilead’s sofosbuvir, and that might be all the compound’s phase 2 activity. Gilead, Merck and AbbVie have NS5A inhibitors in trials, find “Elbasvir is described as a” above. Gilead’s Harvoni includes a NS5A inhibitor and is selling well.
Achillion’s phase 2 candidate pairs their HCV NS5A Inhibitor with Gilead’s HCV NS5B Inhibitor (sofosbuvir). I’m sure they would rather use their own NS5B polymerase inhibitor if they could. That’s the second compound on the pipeline page, in phase 1, a pro-drug uridine nucleotide analog NS5B polymerase inhibitor (after rearranging the words), the same description as Gilead’s Sovaldi/Sofosbuvir (so it’s a “nuc”). It does not seem to be as good as sofosbuvir, as it needs to be taken with ribavirin or pegylated interferon or both, which have side effects. There are some other criticisms in Achillion: The Dark Side by Kanak Kanti De, Feb. 26, 2015 (seekingalpha.com).
Nasdaq give Achillion a market cap around $1.24 billion. Revenue so far has been zero. Liquid assets from cash to receivables are nearly $160 million.
“UPDATE: Achillion Pharmaceuticals (ACHN) Will Be Left Behind, Barclays Starts at Underweight” March 3, 2015 (streetinsider.com) – the short piece looks a few years ahead, and puts Gilead and Merck ahead of Abbvie, but the opinions are not explained.
For more research into Achillion, you could start with Seeking Alpha. One recent news item is the resignation of the Chief Regulatory Officer.
My own research into Achillion has not gone much farther than what you see here.
Selling a combination which is mostly sofosbuvir is great news for Gilead, but it might not be such good news for Achillion. I haven’t seen anything from them that looks like it would beat or equal sofosbuvir in a combination, which seems to make them less of a threat to Gilead than almost any company with positive cash flow, ambition in the area, and some relevance to the market. Cash-burners can also find it harder to raise cash when the market they hope to address is declining, although in this case the peak has not yet been reached, and Achillion have been able to raise capital. (Find “prevalence peaked in the 1990s”, below.) Sometimes genius is surpassed by even greater genius, and that’s probably what Achillion would need to be a threat to Gilead. I’m not saying Achillion are doomed, just that they are not likely to be a serious threat, based on the little information I’ve gathered.
Achillion’s NS5A inhibitor in phase 2 would be more valuable to Gilead than to anyone else, because owning it would mean owning the whole combination. If the combination of the inhibitor and sofosbuvir has not been spat out by AbbVie’s magic model, owning the combination would reduce Gilead’s vulnerability if they lose the patent dispute. But, the combination might not be as good as the candidates in Gilead’s liver disease pipeline, and Gilead might not want to show interest in an acquisition while Achillion’s stock is high on acquisition hopes.
If Merck acquires Achillion, it would be with the intention of using Achillion’s HCV NS5A Inhibitor with their own HCV NS5B Inhibitor (because they don’t need another NS5B “nuc” which is not as good as Gilead’s). Trials for the combination would have to start from scratch. While the combination is likely to be inferior to the NS5A Inhibitor/Sofosbuvir combination which Achillion are putting through trials, it might still improve Merck’s position in HCV relative to Gilead, but the necessary clinical trials would take years, and the market is due to peak. Merck could face complications if they apply for a “breakthrough” designation with the FDA, because the combination would probably be inferior to Achillion’s combination (with Gilead’s Sofosbuvir), and killing that combination to make their own rank higher would probably not impress the FDA. Against that last point, Achillion were hoping to replace Sofosbuvir with their own version as much as they could, and the problem seems to be with the quality of their version, not the attitude of the FDA.
When the FDA rescinded its Breakthrough Therapy designation for Merck’s HCV combination of grazoprevir and elbasvir, Achillion’s stock fell, apparently because Achillion’s breakthrough designation might be at risk, and future breakthrough designations are less likely, as the FDA’s action shows they believe the number and standard of HCV treatments warrants raising the bar. See “Why Achillion Pharmaceuticals, Inc. Stock Is Crashing Today” by George Budwell, February 4, 2015 (fool.com).
Abbvie’s HCV pipeline
Abbvie’s HCV pipeline has a combination for HCV genotype 1 which does not need Interferon, in “PHASE III/SUBMITTED”, and a combo in phase 2. There’s no information about phase 1.
From “AbbVie’s (ABBV) CEO Richard Gonzalez on Q4 2014 Results – Earnings Call Transcript” Jan. 30, 2015 (www.seekingalpha.com) –
“Clearly another important driver of performance in 2015 will be our interferon-free HCV therapy Viteron [ph] which is now been approved in the US, EU and a number of other countries around the world. We are pleased with Viekira product label and updated AASLD treatment guidelines and we believe both reflect the strength of the product’s clinical profile across genotype-1 patient population.”
I can’t find anything else about “Viteron”, and I’m wondering if it’s a transcription error. I can’t see it on “2014 FDA Approved Treatments For Hepatitis C” or “New Hepatitis C Drugs Coming in 2015” by Nicole Cutler L.Ac., January 12, 201 (hepatitiscentral.com).
All I could find in AbbVie’s 10-K about their HCV pipeline was –
“AbbVie is also currently conducting Phase 2 studies of its next-generation HCV program which includes ABT-493, a potent protease inhibitor, and ABT-530, AbbVie’s new NS5A inhibitor.”
Gilead, Merck and AbbVie have NS5A inhibitors in trials, find “Elbasvir is described as a” above. Gilead’s Harvoni includes a NS5A inhibitor and is selling well.
I have not found much detail about Abbvie’s HCV pipeline. In addition to their normal development pipeline, Abbvie’s virtual model and legal action can be seen as an another way to get income from intellectual property in addition to acquisitions or developing the pipeline.
Further research into competition in the pipeline
One line of research is to go to www.clinicaltrials.gov and search for HCV. Not every result will be relevant. The site was not designed for investors and I haven’t seen any info linking trials to companies.
Recent financial results
In the table below, I’ve noticed that I have not been consistent about making expenses negative and red. I needed most of them to be positive, for the appearance of the chart (the 3D chart after the table).
About the “Long-term marketable securities”, I believe they are relatively realizable. On page 93 of the 10-K PDF for 2014, they are classed as “available-for-sale securities”, of which only $18 million have a contractual maturity over 5 years (compared to $1,598 million of Long-term marketable securities). None of the assets recorded at fair value are “Level 3”, the hardest of the three levels to assess (for 2013 or 2014).
To see figures for the fantastic growth from 2005, and excellent returns metrics, see Morningstar’s Ratio tab (morningstar.com/ratios).
Sometimes companies are too enthusiastic about capitalizing costs to make them look like investment instead of expenses. Nothing in the investment cash flow suggested that. I found “We had unamortized capitalized software costs on our Consolidated Balance Sheets of $80 million as of December 31, 2014 and $84 million as of December 31, 2013.”, and “We capitalized $20 million related to the milestone incurred in connection with the FDA approval of Stribild and $12 million related to the milestone we incurred in connection with the European Commission approval. Both milestones are being amortized over the useful patent life of elvitegravir, which is approximately 10 years, expiring in 2023.”. The “accumulated depreciation and amortization” of $620 million includes “$2 for 2014 and 2013 relating to capitalized leased equipment”, i.e. $2 million, and while the value of capitalized leased equipment will be a lot bigger than that I’d guess it’s still small. Because life is short and the items are small compared to the $2,854 million R&D expense, I did not worry about whether or not the capitalizations were proper.
Full Year 2015 Guidance
The guidance is in the earnings call, the earnings release and the “2015 Guidance” PDF on Gilead’s Earnings page. In the following table, the first three columns show the 2015 guidance, and they are likely to be the most reliable columns.
Guidance only gave Product sales, and not Royalty, contract and other revenues. Instead of adjusting guidance to include royalties etc., I adjusted the 2014 figures where necessary to exclude the royalties etc., to give a reasonably fair comparison with the guidance, although I’m not asking anyone to trust the comparison a lot. A full explanation would have taken too much time and space. If you need to know what I did, you can find the formulas by finding “The spreadsheet formulas” above, for a link. I calculated the 2014 non-GAAP gross margin backwards from the non-GAAP EPS, and if you find a better source, that might not be necessary.
It was reasonable to put the highest R&D expenses under the ‘Worst case’ columns, but I don’t mean to imply that high R&D expense is bad. Similarly, SG&A expense is necessary to build the business, and a higher expense is only likely to be bad if it’s the result of inflation or inefficiency.
Gilead beat Q4 analyst estimates after Q3 fell short (according to Zacks on Yahoo). Apparently the outlook disappointed. Estimates were “crushed” back in Q1 according to Gilead Beats by a Billion” by: Ian Wyatt, 05/09/2014 (moneyshow.com), which shows that analysts can be wrong about Gilead.
2014 net product sales beat revised guidance. Non-GAAP R&D expenses were bigger than guided, due to two one-offs – buying a voucher for FDA priority review, and a collaboration with Ono Pharmaceutical, possibly buying the rights to Ono’s Once daily BTK inhibitor outside of Japan, China and ASEAN countries (for the treatment of B-cell malignancies and other diseases).
I thought Gilead’s 2015 guidance was probably conservative, and I’m not alone – find “Michael Yee and RBC Capital” below.
Compensated and decompensated cirrhosis of the liver
Anyone with a liver problem should refer to reputable sources and not rely on my writing (investors can do the same, if they have the time).
According to Wikipedia, 30% of cases of cirrhosis are caused by hepatitis B, and 27% by hepatitis C. Those are global figures and they could be lower for the U.S. and other developed countries. The second most common cause is alcohol consumption. Wikipedia gives bullet points to 16 causes.
Cirrhosis of the liver is permanent scarring, which results when the liver tries to repair damage. The damage means it doesn’t work as well.
Compensated cirrhosis is the first stage, with relatively light damage, and patients might not be aware of anything wrong at first. Symptoms include feeling tired, nausea, abdominal pain, loss of appetite, weight loss, and small red spots on the skin called spider angiomas.
Decompensated cirrhosis is the second stage, with serious liver damage. Symptoms include fluid buildup in the legs, feet and abdomen, itching, bruising and bleeding, and the skin yellowing (jaundice). For the non-squeamish, there’s a picture on Wikipedia.
For more symptoms and detail, see Wikipedia or “Cirrhosis” (umm.edu/health).
The Pharmasset acquisition (for hepatitis C drugs) was criticized at the time due to the price and the lack of meaningful revenue. For one example of the criticism, find “Paying Too Much” in “Gilead to Buy Pharmasset for $11 Billion to Win in Hepatitis” by Margaret Tirrell and Ryan Flinn, November 21, 2011 (bloomberg.com). Gilead were already the leaders in HIV, and now lead in hepatitis C. One risk is that another big deal might not go as well, although the company is now bigger and could survive a setback better.
With Pharmasset, Gilead acquired Sofosbuvir which is now sold as Sovaldi. Harvoni contains Ledipasvir (which Gilead already had) and Sofosbuvir.
The hepatitis C cures
Sovaldi is generally useful against HCV across genotypes as part of a combination, while Harvoni targets genotype 1, the common genotype which infects 70% of HCV patients in the U.S..
Sovaldi is the commercial name for the drug sofosbuvir. It was approved in the U.S. in December 2013, and by the European Commission in January 2014 for genotypes 1 to 6. Gilead claimed high rates of cure and a shortened course of therapy (12 weeks), patients who can’t take Interferon had their first option for a completely oral treatment, and previously there was no effective regimen to stop HCV from recurring after a liver transplant, that could be taken while waiting for a transplant. See this News release about the E.C. approval. The claim that Sovaldi was good for genotypes 1 to 6 was qualified by –
“The clinical data supporting the use of Sovaldi in patients with genotypes 5 and 6 is limited.”
but the 10-K for 2014 has –
“Sovaldi’s efficacy has been established in patients with HCV genotypes 1, 2, 3 or 4 infection (in United States and Europe) and genotypes 5 and 6 infection (in Europe),”
The problem may be that genotypes 4, 5 and 6 are uncommon in Europe.
Harvoni combines ledipasvir with sofosbuvir (aka Sovaldi). It was approved in the U.S. in October 2014, and in the E.U. in November 2014. Harvoni is a single pill once a day, benefiting the “type 1” patients who needed to take interferon and ribavirin with Sovaldi, or use Viekira Pak from competitor AbbVie with a higher pill count. The pill count affects how regularly patients take the pills, and the regimen is obviously less effective if the pills are missed or taken at the wrong time.
From “Gilead Sciences’ (GILD) Management Presents at Cowen & Company 35th Annual Health Care Conference (Transcript)” Mar. 3, 2015 (www.seekingalpha.com),
“Harvoni is recommended for genotype 1 patients and requires a dramatically lower pill count compared to Viekira Pak.”.
Sovaldi sold $10 billion worldwide in 2014, with 32,000 patients treated. 31,000 patients started treatment with Harvoni between launch and the end of 2014.
Market share in HIV and Hepatitis C
“Biotech Head-to-Head: Gilead vs. Celgene” by Todd Campbell and Michael Douglass, February 26, 2015 (fool.com). An industry analyst (and enthusiastic shareholder) implies that around 80% of new HIV patients have a treatment which involves a drug from Gilead.
This site has too much page junk, IMO – “Gilead Sciences, Inc. Continues To Lead The Hepatitis C Market; Its HCV Drugs See 4.5% Growth” by Hannah Ishmael, Feb 28, 2015 (bidnessetc.com). The prices in the article look higher than the prices likely to apply in practice, find the link with “US pharmacy deals could cut costs”, below.
“Why Gilead Sciences Doesn’t Seem Too Worried About AbbVie’s Hep-C Treatment” by Ben Levisohn, February 17, 2015 (blogs.barrons.com).
This is probably the most relevant link – “The Hepatitis C Scorecard: Gilead is Trouncing AbbVie, but at a Price” by Ed Silverman, Feb 12, 2015 (blogs.wsj.com). The ‘price’ is the discounts Gilead had to make, find “46% overall discount”, below. Also find “Info about prescriptions” below, about getting weekly figures for US prescriptions.
Hepatitis C (HCV) numbers
2% to 3% of the world’s population are estimated to be infected by hepatitis C, with a lower rate of infection in developed countries, see “Hepatitis C” by Deborah Holtzman (Centers for Disease Control and Prevention). Applying 2% to 3% to a world population of 7.2 billion gives 144 million to 216 million.
Many cases are undiagnosed, and when diagnosed, many cases are not treated unless or until there are serious effects, such as cirrhosis of the liver. About the delay in treating diagnosed cases –
“in many countries patients are unlikely to use prescription drugs that are not reimbursed by their governments. In addition, negotiating prices with certain governmental authorities can delay commercialization by 12 months or more.” (10-K for 2014)
Infection is through sharing or reusing hypodermic needles, or unscreened blood transfusions or unscreened organ transplants. In developed countries, screening is much more effective than in the past. It’s harder to reduce infection by intravenous drug users who share needles.
The WHO has reported the prevalence of transfusion-transmissible infections (TTI) in high, middle and low income countries. For HCV prevalence in blood donations, the figures are –
0.02% for high-income countries
0.37% for middle-income countries
1.07% for low-income countries
but with quite wide ranges in each case.
The figures are from “Blood safety and availability” Fact sheet N°279, Updated June 2014 (who.int).
Myanmar is an exception I did not expect, see “Myanmar National Blood Center: Receiving a Prestigious International Award” June 1, 2014 (jica.go.jp).
The piece in the next link claims that prevalence peaked in the United States in the 1990s and will be down to a third of the peak level by 2030. Serious liver disease peaks later than prevalence, and the delay should mean that the incidence of disease can be predicted more easily. “Revolutionizing Treatment Outcomes in Hepatitis C: Managed Care Implications and Considerations—The New and Evolving Standards of Care” by Gary M. Owens, MD, March 24, 2015 (ajmc.com)
This is a bit old, but it looks quite far ahead – “U.S. Hepatitis C-Related Health Care Costs to Peak at $9.1B in 2024” January 24, 2013 (hepmag.com).
The paper – “Chronic Hepatitis C Virus (HCV) Disease Burden and Cost in the United States” by Razavi H, Elkhoury AC, Elbasha E, et al., Hepatology June 2013, online May 6, 2013 (ncbi.nlm.nih.gov) – looks like the source of at least some articles with projections. The abstract, conclusion, and much of the rest are readable by non-academics, although there’s a high density of facts and figures. It’s easy enough to get the general idea from four charts showing various peaks. Bearing in mind the title (so the costs should be HCV-related, and U.S. only), paraphrased from the paper –
Prevalence of compensated cirrhosis was expected to peak at 626,500 in 2015.
Prevalence of decompensated cirrhosis was expected to peak at 107,400 in 2019.
The annual cost of compensated cirrhosis of the liver was expected to peak at $1.9 billion in 2022.
The annual cost of decompensated cirrhosis of the liver was expected to peak at $4.2 billion in 2025.
The annual cost of chronic hepatitis C (CHC) was expected to peak at $1.4 billion in 2025.
(Technically, prevalence should be a proportion, but I’m not trying to write a Phd thesis.)
I probably shouldn’t add peaks for different years, but I have, and it comes to $7.5 billion. Those projections may be out of date already, but it’s hard to be sure because I have not found figures which are higher, more recent, and confined to the same categories. For comparison, a chart near the top of this piece shows Sovaldi sold $10,283 million, and Harvoni sold $2,127 million, in 2014. The sales will be heavily U.S. weighted, and Harvoni was not on sale for long. While prices have come down, access has been improved.
The article “New hepatitis C drugs predicted to place a dramatic financial strain on health care system” University of Texas M. D. Anderson Cancer Center, March 16, 2015 (sciencedaily.com), gives a projection which amounts to an average cost of $27.2 billion per year over the next five years, for hepatitis C drugs. Another source projected spending on hepatitis C drugs in the U.S. to reach over $20 billion in 2018, getting there with growth over 6% p.a., find the link “At $84,000 Gilead Hepatitis C Drug Sets Off Payer Revolt”, below (the info is under the heading “Increasing Costs”).
The figures in the bullet points below are from “Gilead Sciences (GILD) CFO Robin Washington Presents at RBC Healthcare Conference (Transcript)” Feb. 27, 2015 (on www.seekingalpha.com). I’m not sure what all the figures mean, for example the prevalence in Italy is probably all cases of HCV infection, but it was not specified.
• Patients treated in 2014 in the United States with either Sovaldi or Harvoni, 140,000.
• Expected to be treated in the U.S. in 2015, under 250,000 (240,000 and 250,000 were also mentioned).
• Diagnosed patients in the U.S., 1.6 million (that would last 6.4 years if 250,000 were treated per year, without counting new cases).
• Undiagnosed cases in the U.S, 2 million, but prevalence is estimated at over four million (which is more than the sum of diagnosed and undiagnosed cases, 1.6 + 2 million = 3.6 million).
(It’s also been claimed that 3.2 million Americans are infected with HCV, and more than three quarters of them develop chronic infection, which can be without symptoms until damage to the liver causes them. Find the link “FDA Approves Olysio (simeprevir) in Combination with Sofosbuvir for Genotype 1 Chronic Hepatitis C Infection”, below.)
Advertising and education could help to get more cases diagnosed. The current attitude in the medical profession is that early-stage liver disease does not need treatment urgently, so there will be a delay between diagnosis and treatment, and not every case is likely to be treated.
The limited number of doctors and the patients they can see is also a ceiling on the rate at which diagnosed patients can be treated.
The size of the market puts a ceiling on the opportunity, and competitors will take at least some market share.
While not stated, the numbers above seem to be U.S. only.
• Expected to be treated in 2015 in Europe, 100,000.
• Prevalence in Italy, 1.5 million (unusually high, and prevalence could be above average in other southern European countries).
• Run rate in Europe, $2 billion per year. The run rate probably assumes that sales are level with the most relevant recent period, and is not a projection. It’s based on sales in only two countries, France and Germany, Sovaldi only (no Harvoni sales), with restrictions that are likely to become looser because prices have been agreed.
Agreements in Europe vary between countries, and some are confidential. In Europe, lower prices result from higher volume, rather than better access. Until the data is in, it’s not easy for Gilead to give an average European price, probably for any product with potentially high volume, and it’s harder for anyone else, due to the confidential agreements.
The suggestion that prices in Europe would be 65% to 70% of the U.S. price was not “totally out of the ballpark” according to the CFO.
• Number of HCV patients in Japan, a million. (The article “A No-Nonsense Projection Of Gilead In 2015” by Anthony Clarke, Mar. 18, 2015 (seekingalpha.com), has a lot about Japan. See also “Japan’s Ministry of Health, Labour and Welfare Approves Gilead’s Sovaldi® (sofosbuvir) for the Treatment of Genotype 2 Chronic Hepatitis C” Mar. 26, 2015 (gilead.com).)
• Proportion of genotype 2 and 3 patients in Japan, 30%. Harvoni won’t be prescribed for genotype-2, but Sovaldi could be.
“Marketing applications for sofosbuvir and the fixed-dose combination of ledipasvir and sofosbuvir are pending in Japan.” (10-K for 2014)
(I’ll remind that sofosbuvir is known commercially as Sovaldi, it’s one of the two ingredients in Harvoni, and Harvoni targets HCV genotype 1.)
According to the analyst Michael Yee, genotype 1 represents the other 70% of the HCV market in Japan. Bristol-Myers Squibb got there first with a product that’s only good for genotype 1, with about a quarter of a billion sales (USD) in a quarter.
Revenue from Japan (for HCV) is likely to start near the end of 2015.
BTW I don’t usually have much praise for analysts, but Michael Yee asked some pertinent questions about how hepatitis C sales will trend over several years.
A ‘promising’ HCV vaccine
A “Promising new HCV vaccine” by Audrey Lin, 11 November 2014 (applevir.org), seems some way off.
The genetic diversity of HCV is a problem mentioned in the paper. Some people with HCV spontaneously clear the virus, and the vaccine is based on the T-cell response seen when that occurs. 15 healthy volunteers showed the right kind of T-cell response, and the vaccine appeared safe. The author says the vaccine “shows promise”.
Hepatitis B (HBV)
Worldwide, about 240 million people have chronic HBV, see Hepatitis B by Francisco Averhoff (Centers for Disease Control and Prevention).
Viread is used to treat HIV, but it’s also listed under “Liver diseases” and is …
“dosed once a day for the treatment of chronic HBV in adults with compensated and decompensated liver disease.” (10-K for 2014)
It’s licensed to GlaxoSmithKline Inc. (GSK) for chronic HBV in China, Japan and Saudi Arabia.
Hepsera is listed under “Liver diseases” and is dosed once a day to treat chronic HBV, in patients 12 years old or older. It’s licensed to GSK for the treatment of chronic HBV in Asia Pacific, Latin America and some other places.
The pipeline includes –
TAF (nucleotide reverse transcriptase inhibitor) (in phase 3)
(Phase 3 has been completed for TAF for HIV.)
GS-4774 (Tarmogen T cell immunity stimulator) (in phase 2)
GS-9620 (TLR-7 agonist) (in phase 2)
Apart from the phase 3 results for TAF for HIV, the info is from Gilead’s Q4 2014 earnings slides PDF.
I don’t know what proportion of HBV patients could be treated with Gilead’s approved or candidate products.
See “The HIV/AIDS Epidemic in the United States” Apr 07, 2014 (kff.org). Over 1.1 million people are infected in the U.S. New infections peaked in the 1980s, but have remained stable at around 50,000 for over a decade.
The WHO puts the number of people with HIV/AIDS worldwide at 35 million, in 2013 – “HIV/AIDS” (who.int)
From “UNAIDS reports that reaching Fast-Track Targets will avert nearly 28 million new HIV infections and end the AIDS epidemic as a global health threat by 2030” 18 November 2014 (unaids.org) –
“We have bent the trajectory of the epidemic,” said Michel Sidibé, Executive Director of UNAIDS. “Now we have five years to break it for good or risk the epidemic rebounding out of control.”
The FDA can give a drug in development either “Fast Track” status, or a “Breakthrough Therapy Designation“. In each case, the FDA will expedite the approvals process, although it depends on the company not delaying its communications with the FDA. The links give clear explanations. Investors tend to say that a treatment has been “fast-tracked” if it’s actually been given the breakthrough designation.
The criteria in the links for both designations do not include increasing competition. I can’t say “The FDA will never fast-track a product in order to increase competition.”, but I know of no evidence beyond the fact that most approvals probably hurt a competitor.
Two competing hepatitis C products have been fast-tracked, and then taken off the fast track, due to the existence of four licensed products. See “Merck’s hep C drug no longer a ‘breakthrough’” by Thomas Meek, 5th February 2015, (pmlive.com), where the list of four new treatments starts with two from Gilead, and see “BMS follows Merck as glut of HCV drugs leads to loss of fast-track status” By Dan Stanton+, 11-Feb-2015 (in-pharmatechnologist.com). The ‘glut’ is the same four products as in the previous link.
Pricing in the U.S. and other developed countries
The piece “US pharmacy deals could cut costs of AbbVie and Gilead’s HCV treatments” By Dan Stanton+, 06-Jan-2015 (in-pharmatechnologist.com), allows the quote –
“Gilead and AbbVie’s exclusive deals with payers CVS and Express Scripts could help cut the cost of the new class of treatments for America’s three million Hepatitis C sufferers.”
Governments don’t like high prices for drugs. The tax in France (later) was an open measure to claw back cash one way or another. It’s normal for drugs to start at a higher average price and sell mostly to private buyers, and for the price to come down as more sales are made to public agencies, and as agreements are made with the large buyers. Management have stated in earnings calls that the process has been accelerated (a physicist would say no, it’s been faster). The average price is also affected as sales build in other countries.
Typically, in return for rebates (from Gilead), restrictions can be eased, such as how badly diseased a liver has to be before an insurer pays for the relevant medication. (Find “The insurance companies that Gilead” for a comment by rational2168 under the Q4 2014 earnings call transcript, and there are other well-informed comments there).
This gives a flavor of the opposition to Gilead’s early pricing – “Activists Hold Die-In to Protest High Price of Gilead’s Hepatitis C Drug” by Michel Sidibé, UNAIDS, July 24, 2014 (treatmentactiongroup.org). The article grives a price range of US$84,000 to $168,000 for the Sovaldi regimen in the United States. Less committed sources stick with $84,000 – “At $84,000 Gilead Hepatitis C Drug Sets Off Payer Revolt” by Drew Armstrong, January 27, 2014 (bloomberg.com). For comparison – “U.S. FDA approves AbbVie hepatitis C drug, costs $83,319 for 12 weeks” by Caroline Humer, Mon Dec 22, 2014 (reuters.com). See also “Payers hit back at Gilead for $94,500 price tag on brand-new hep C combo pill” by Carly Helfand, October 13, 2014 (fiercepharma.com).
About interest from the U.S. Senate –
“In July 2014, we received a letter from the U.S. Senate Committee on Finance requesting information and supporting documentation from us related to Sovaldi and the pricing of Sovaldi in the United States. The letter raised concerns about our approach to pricing Sovaldi, its affordability and its impact on federal government spending and public health. We are cooperating with the inquiries. It is both costly and time consuming for us to comply with these inquiries. We cannot predict the outcome.” (10-K)
See “US lawmakers question price of Gilead’s hepatitis C drug Sovaldi” by: Joe Barber, July 11th, 2014 (firstwordpharma.com).
That might not be much of an issue now, as I could not find “letter”, “Senate” or “Committee” in the earnings call transcript, or the RBC or Cowen & Co conference transcripts, although there might not have been much point in asking about it before any further news.
The media frequently highlighted the “$1,000 a day” or “$1,000 per pill” price tags (google – Gilead $1,000 a pill). A cure is better than a lifetime palliative, and requires fewer pills. A short course of treatment is better and requires fewer pills. A single pill is better than mutliple pills, and requires fewer pills. Once per day is better than more than once per day, and requires fewer pills. Pills are better than most other methods of treatment (exceptions, such as acidic pills given to elderly patients, don’t seem to be relevant here). The total cost of a course of treatment matters, as well as all the benefits including the benefits of convenient administration. “$1,000 per pill” does not reflect those considerations.
While initial prices may have been too high, it’s normal for the price to come down. There’s a third factor for Harvoni – volumes were surprisingly high, or shockingly high for the the PBMs (Pharmacy Benefit Managers) who had to pay, so they were keen to get rebates, and in return, Gilead got improved access (meaning Harvoni was available to a wider set of patients). I don’t go into the ability of PBMs to pass on the cost, because the issue here is not who bears the ultimate cost, and PBMs don’t say “never mind, we’ll just pass the cost on”, they resist high prices.
Price variation in the U.S.A.
There is not usually a single price for a drug. Pharmacy Benefit Managers (PBMs) like Express Scripts (ESRX) buy in bulk and negotiate discounts. They can get a bigger discount in return for an exclusive agreement, to buy only one company’s product for a particular condition. Some patients with the condition could have a variation which means they can’t be prescribed the product with the exclusive agreement, and the buyers have to buy from a pharma company which won’t be happy about being excluded. The excluded company will not want to give any discount on such sales (and would like to charge as much as possible). The resulting price will be higher than the price charged where the company has agreed a lower price in return for volume. These links have information about exclusive deals, but not about the revenge of excluded companies – “Sorry, Gilead. AbbVie cuts exclusive hep C deal with Express Scripts” by Tracy Staton, December 22, 2014 (fiercepharma.com). That’s fairly anti-Gilead, and for balance there’s “How Drug Company Gilead Outpaces Its Competitors—And Common Diseases” by J.J. McCorvey (fastcompany.com) which also mentions Express Scripts. Gilead’s CFO Robin Washington said –
“If you take a look at the large PBMs, nine out of 10 have ultimately chosen Harvoni. And of those nine, eight have chosen exclusive.” (seekingalpha.com)
For the source and a link, find “RBC Healthcare Conference (Transcript)” above.
It’s possible that sometimes when exclusive deals are referred to, that might be short for “preferred or exclusive formulary status”, a phrase used in the link “The Hepatitis C Scorecard: Gilead is Trouncing AbbVie, but at a Price” (above). I can’t prove that any use of “exclusive” ought to have been “preferred or exclusive”.
So I can write more about price variation, I’ll assume here that Gilead’s IP is rock-solid – If a competitor sells a combination which includes a Gilead product, the combination could cannibalize the product’s sales. Gilead’s management would have to be crazy to agree a discount big enough to make the total revenue smaller, the more of the competitor’s combination is sold. Gilead could agree a discount if the combination gained access to patients, if the cannibalization of Gilead’s sales was low enough or non-existent. That’s another kind of case where pricing can be at the high end. When two companies use each other’s products in combinations, the terms are more likely to be reasonable, to the extent that the relationship is equal. In such cases the pricing is likely to be closer to the pricing that a single company would choose based on normal commercial factors.
For an example of a competitor using a Gilead product in a combination, see “FDA Approves Olysio (simeprevir) in Combination with Sofosbuvir for Genotype 1 Chronic Hepatitis C Infection” Nov. 5, 2014 (drugs.com). Olysio / simeprevir belongs to Janssen Therapeutics. Gilead’s 10-K mentions the drug at the end of …
“Our HCV products, Sovaldi and Harvoni, compete with a product marketed by AbbVie Inc. (Abbvie) and Janssen R&D Ireland’s Olysio (simeprevir) in the United States.”
… under “We face significant competition.”.
The relationship is reversed for Gilead’s HIV combo Complera/Eviplera, which includes a Janssen product.
“Complera/Eviplera is an oral formulation dosed once a day for the treatment of HIV-1 infection in adults. The product, marketed in the United States as Complera and in Europe as Eviplera, is our second complete single tablet regimen for the treatment of HIV and is a fixed-dose combination of our antiretroviral medications, Viread and Emtriva, and Janssen’s non-nucleoside reverse transcriptase inhibitor, Edurant (rilpivirine).”
The 10-K lists Janssen under “Commercial Collaborations”, as well as naming them as a competitor. Janssen are owned by Johnson & Johnson.
I’ll repeat here that government agencies pay less.
About guidance, the CEO said –
“What we have in there is the range of different prices depending on the mix of private to public and there are a range of different discounts offered across all those areas.” from the Seeking Alpha transcript “Gilead Sciences’ (GILD) CEO John Martin on Q4 2014 Results – Earnings Call Transcript”, linked to above.
From the same transcript, about “gross to net” –
“We expect our 2015 growth to net adjustments for our HCV products in the United States to be approximately 46% or a little more than double of that where we ended 2014 which was around 22%.”
The 46% overall discount is sometimes called “Gross to net”, where “gross” is at the list price and “net” is net of rebates or discounts. “growth to net” in the quote looks like a transcription error.
The effect of exclusive deals
The exclusive deals that Gilead and Abbvie have signed with the major PBMs don’t seem to leave much room in the U.S. market for treatments in other companies’ pipelines (find “Merck’s HCV pipeline” and “Achillion’s HCV pipeline”, above). I don’t know how long the agreements last, but I”d guess that anything much more than a year or two would be anti-competitive, because it would deny patients the benefit of innovation from other companies. Gilead have stated that they prefer letting doctors choose, but they can’t be expected to refuse exclusive agreements when that’s what the PBMs want, and when the giant Express Scripts signed an exclusive agreement with a competitor.
One reason for the PBMs’ enthusiasm for exclusive deals in this area may be that the drugs work, and they are safe, leaving limited room for improvement, even though Gilead’s liver disease pipeline is aimed at doing just that.
Obviously a U.S. deal does not affect sales in the rest of the world. If the U.S. market is sewn-up for a while, it does not necessarily mean that excluded companies have poor prospects in HCV, although the U.S. is a major market and it’s expected to peak.
The TRIPS agreement
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), is generally what you’d expect from the name. The HIV/AIDS epidemic in Africa prompted some loosening of IP protection to allow access to essential medicines. A modification in 2003 allowed exports from one developing country to another, with restrictions such as packaging which is clearly different from the packaging used in developed countries. Those simple facts can cause complications for pharma companies and give rise to financial journalism of the kind light on nuance.
Production for low-price sales
Gilead can’t stop unauthorized production in Bangladesh and Egypt, because the World Trade Organization allows the non-enforcement of patents in some poor countries. Authorized production in India is sold at much lower prices than in the U.S., and is authorized for sale into agreed countries (poor ones). My guess is that unauthorized production in Bangladesh would leak into India if the price in India was much higher. In any case, India refused to grant a patent for Sovaldi (Gilead will appeal). India also has a big problem with counterfeit drugs.
See “$10 version of Sovaldi available in Bangladesh” by Douglas W. House, SA News Editor, Mar 9 2015 (seekingalpha.com), and Indian drug firm cleared to sell generic sofosbuvir” by Douglas W. House, SA News Editor, Mar 12 2015, (seekingalpha.com/news).
I don’t mean to imply anything about the Indian companies Gilead have agreements with, but it’s worth knowing about the problems in India. See India becomes a hub for fake medicines on safemedicinesindia (not dated), and if you can bear the page-junk, “Is your medicine a fake? Government report warns counterfeit drugs are flooding India” by Neetu Chandra, March 5, 2014 (dailymail.co.uk), which includes the claim that India has over 10,000 drugs manufacturers.
This looks exaggerated – “How India’s Patent Office Destroyed Gilead’s Global Game Plan” by Bruce Einhorn, January 15, 2015 (bloomberg.com). The most credible claim in the article is probably that India’s ruling will help challenges to Gilead’s Sofosbuvir patent in other countries. IMO courts and agencies in developed countries will not take a lead from India. No block-buster drug is likely to be sold at developed country prices in developing countries, by any company, and yet it seems to be big news when Gilead don’t achieve that. Bloomberg say Bruce Einhorn is an “Asia regional editor” and was an “Asia technology correspondent” (you can check the frequency and variety of his article titles here.)
I suggest finding the comment by Ptatty which mentions “TRIPS” under “Gilead Sciences Inc. Faces An Uncertain Future After Patent Loss In India” by Rami Alsamaraee, Mar. 30, 2015 (seekingalpha.com).
Overseas online pharmacies
The sellers that don’t abide by the law in the country they operate from are likely to supply sub-standard or dangerous pills. I suggest reading Wikipedia’s page or finding your own source for more detail.
Wikipedia describes verification programs. This is one of them – Verified Internet Pharmacy Practice Sites (VIPPS) program. When I put “h t t p : / / w w w.drugs******.com” into the box and clicked “Verify” I got “This pharmacy is not in the VIPPS database. Please report this occurrence to NABP by using our feedback form.”. (The spaces are so the URL won’t work as a link, and the asterisks are because I don’t want to publicize the drug seller.)
This story suggests there were allegations in China that Alibaba’s employees allowed fake drugs to be sold. “Chinese square off against Alibaba in palace intrigue as online drug sales loom” by EJ Lane, February 2, 2015 (fiercepharma.com). The story is vague, because it avoids saying directly that the fakes included drugs, or even that sales of fake drugs were alleged, yet “drug” occurs 21 times and the story is on fiercepharma.com. It isn’t hard to google-up things like “High Quality Sofosbuvir API/ Purity 99% Sofosbuvir ( sovaldi )” on alibaba.com. For ledipasvir, one result on Alibaba quoted “US $ 10,000 – 50,000 / Gram”, while a “Verified Supplier” quoted “US $ 1 – 100 / Kilogram” for what seems to be 99% pure ledipasvir in powder form, from any port in China. I don’t know how fussy the supplier is about who they sell to (I could guess). Some of Gilead’s HIV drugs seem to be on sale, or at least intermediates for them. I’d appreciate comments here because I’m not sure how to interpret the offers on Alibaba, but on the face of it, the active ingredients are made and sold at low cost in China.
Opinion on the low-cost trade
Everything from the problems patenting sofosbuvir in India to unauthorized cross-border trade is not special to Gilead. Instead I see an unresolvable tension between the need for pharma companies to have an incentive to develop drugs, and patients who desparately need a cure and can’t afford it, as well as other patients and other parties who want to keep costs down. The tension creates a suitable environment for generics companies, lawyers, online pharmacies of varying legitimacy, etc. A crucial factor is that the costs are both up-front and intellectual in nature, so there’s little up-front cost for copyists.
Gilead in France
See “France uses tax to put pressure on hepatitis C drug prices – (Daily Mail via NewsPoints Desk)” September 30th, 2014 (firstwordpharma.com).
It’s a concern because there doesn’t seem to be any downside for France, which other countries are likely to notice, and unlike the rebates in the U.S., there’s no volume or increased access for Gilead in return for the tax.
Tax in the U.S.A. and overseas
See “Gilead Avoids Billions in U.S. Taxes on Its $1,000-a-Pill Drug – (Bloomberg via NewsPoints Desk)” February 26th, 2015 (firstwordpharma.com).
Info about prescriptions
On the blog site “Gild – Gilead Science Shareholders” (gileadscienceshareholder.blogspot.co.uk), find “GILD Harvoni’s scripts were”, and you’ll see a list of weekly figures for US prescriptions. As at March 13, 2015, the figures show a steady rise for the year so far. “nrx” means new prescriptions, and I’d guess “trx” means total prescriptions (new plus repeat prescriptions).
The sources are “Symphony/BBG”, or Symphony Health Solutions and Bloomberg. I don’t know who their sources are, and I would not assume that every body gives them the data they would like to have. I expect that every prescription counted was real, but I would not assume that all prescriptions were counted. The conservative approach is to not assume that Gilead’s U.S. prescriptions are much more than reported (at least, not without a good reason), while not assuming that low numbers for a competitor are accurate. So long as the exclusions stay the same, a rise in the weekly figures is very like to reflect a real rise in the U.S. total. I hope that someone who knows more about it can simplify my qualifying statements.
See also the “BMD Asset Management and Research” instablog (on seekingalpha.com).
The employee reviews on Glassdoor can give a valuable insight into a company, although employees are no more unbiased than other stakeholders, and the “disgruntled employee” is common enough for the adjective to have become fairly standard. Unfortunately, I can only get the UK version, and I suggest checking the US version if you can. The score I see is very nearly three whole stars out of a possible five.
Generally, the drug devlopment side is praised. There’s much complaint about the work/life balance (which is not unusual, but it seems to be worse than average). There’s one low opinion of each of these – the commercial side, the IT, and the bureaucracy. It’s worth finding the review which contains “Little company syndrome”. The most severe criticism includes “turf fights”. The lean model is blamed for demanding too much from staff. It’s reported that staff changed tasks fairly frequently, but it was not said to be excessive or reduce productivity.
Employee reviews on indeed.com give an average of four stars (out of five), and were mostly very positive. Reviews on Indeed seemed more effusive and less critical of management, but I haven’t compared reviews from the two sites in any systematic way.
A bear’s view, and insider deals
This is bearish – “Forget Gilead Sciences (GILD), Buy These Biotech Stocks Instead” by Zacks Research Staff, March 06, 2015 (zacks.com). The EVP and a director have recently sold over $700,000 worth of shares, and earnings estimates have gone down.
A director bought nearly $1 million worth of shares on February 20, 2015, see “Gilead insider buys 10000 Shares“. As Peter Lynch said in “One up on Wall Street”, there are many reasons why an insider might sell shares in the company, but there’s only one reason to buy.
Michael Yee and RBC Capital
I noticed Michael Yee’s questions were pertinent and unusually relevant to the long term in the RBC Healthcare Conference. Michael Yee of RBC Capital is in tipranks‘ top 5% of analysts. He has rated Gilead more times than he’s rated any other company. I’ll just say the number is in double figures but under 20, and his performance is likely to have been assessed over a few years at least. The performance of each rating is based on returns over the following year.
Before 2014 results were out, RBC were reiterating “outperform”. Soon after the results – “Gilead (GILD) Price Target Lowered to $118 at RBC Capital” February 4, 2015 (streetinsider.com), although “outperform” was maintained. Michael Yee believes Gilead’s guidance is conservative, see “Bigger drug discounts put question mark over Gilead’s stellar run” by Reuters, Fortune Editors, February 4, 2015 (smarteranalyst.com).
On Tipranks I noticed a buy recommendation by Michael Yee for Uni-Pixel (UNXL) from two years ago. They are a tiny company that were developing touchscreens. There was much bitter argument about the company on Seeking Alpha, with serious accusations levelled at management (I think the management has been mostly replaced, but I stopped following the company). Two years ago, a short term profit could have been made, but UNXL were not a safe company to hold for one or two years. I also saw a ‘hold’ for Dendreon Corp. (DNDN) two years ago, and they went bankrupt. He may be weak at assessing some major risks, or maybe his outperformance was only possible because he learned from experience. Michael Yee’s performance is good relative to other analysts, but I saw no info about performance relative to sector or market indexes.
Less factual …
My piece – Gilead Sciences – highlights, opinions and unconfirmed points (kitchensinkinvestor.wordpress.com).
Last point about Gilead
Management have delivered.
Seeking Alpha transcripts quoted from
“Gilead Sciences’ (GILD) Management Presents at Cowen & Company 35th Annual Health Care Conference” Mar. 3, 2015 (www.seekingalpha.com)
“Gilead Sciences (GILD) CFO Robin Washington Presents at RBC Healthcare Conference (Transcript)” Feb. 27, 2015 (www.seekingalpha.com)
“Gilead Sciences’ (GILD) CEO John Martin on Q4 2014 Results – Earnings Call Transcript” Feb. 3, 2015 (www.seekingalpha.com)
“AbbVie’s (ABBV) CEO Richard Gonzalez on Q4 2014 Results – Earnings Call Transcript” Jan. 30, 2015 (www.seekingalpha.com)
Total words: 228
With thanks to Seeking Alpha for their policy about quoting from transcripts, which can be found at the end of the transcript. I hope they don’t mind me quoting from four of them.
Thank you for reading this.
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