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You could even call it Uber (NYSE: UBER) for biopharma. The company is significant, but its reputation is a predator, which can still cost shareholders.
Gilead first appeared on Wall Street after pricing his hepatitis C drug, Sovaldi, at $ 84,000 per treatment in 2014. A year later, it priced the follow-up Harvoni at $ 94,500.
The drugs worked, but it was a backlash. England was forced to resort to rationing. Gilead began offering a “cheaper” generic version for $ 24,000 in 2018.
Now the shares are hot again because its strapsivir can help people with the new coronavirus.
But its past can catch up.
In March, Gilead remdesivir called it an “orphan drug” after receiving $ 79 million in state aid to develop it for the treatment of Ebola, another viral disease.
It applied for this very profitable status on March 23, after already having trials going on against Covid-19. The new virus is structurally similar. In their early study, two-thirds of seriously ill patients showed “some” improvement.
Remdesivir sent the price of the Gilead share up 21% in just three months. It opened for trading on April 15 at about $ 76 per share. It has a market value of $ 98 billion in sales of $ 22.5 billion.
As part of its plan to take advantage of remdesivir, Gilead initially sought to restrict access and ended the compassionate use program under which humans were treated. It has now reversed that policy. It says it is “turbocharged” production, with plans to offer 500,000 treatment courses by the fall. CEO Daniel O’Day now promises that the drug will now be affordable, but it can still be profitable.
All this before we know if the drug really works. A Chinese trial of the drug, at an early stage, was suspended on April 15. Other trials around the world continue.
The pandemic shines a light on Gilead and its past can now catch up with it.
The past includes fees Gilead delayed a safe HIV drug by five years to extend its monopoly on an older drug. It includes fees that used the “double Irish” tax arrangement to avoid paying US taxes on foreign profits.
Gilead is also involved in a patent lawsuit against Kite Pharma, the immunotherapy company it bought for $ 11.9 billion in 2017. Gilead has since had to write down much of the purchase price.
Now it turns out that Kite may have stolen key technology from Juno Therapeutics, which Bristol-Myers Squibb (NYSE: BMY) picked up to buy Celgene recently. Gilead failed to overturn a $ 752 million fine. A judge has now increased the sentence to 1.2 billion dollars and calls the violation “deliberate”.
The Kite disaster provides comparisons with Uber, which saw the former head of its self-driving car unit accused of stealing trade secrets from the Alphabet (NASDAQ: GOOG, NASDAQ: GOOGL). He now wants Uber to pay his fine and claims that it knew about the theft when it hired him.
The conclusion on GILD stock
Gilead is an industrial destroyer. It has driven the envelope in terms of pricing, taxation and now claimed patent policy. Anger over such tactics is growing, which is why it backed away from trying to win big wins with belt dives.
GILD shares are positive for investors because they have used the Harvoni cash. In addition to Kite, it recently bought Forty Seven, a cancer drug maker, for $ 4.9 billion.
Gilead has created tremendous shareholder value. Over the past ten years, the market value has increased by 292%.
But analysts, cautious about their legal problems, have cooled on the GILD stock. Gilead’s current price is almost equal to one year’s price target, according to TipRanks. Only half of Gilead’s analysts still consider it a buy, and three say investors should sell.
You always buy a company’s future, not its past. That is why markets rise even when the economy crashes. If you buy Gilead’s future today, you are not just buying financial risks.
You can also buy political risks.
Dana Blankenhorn has been a finance and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. At the time of writing, he did not own any of the companies mentioned in this story.