Shares of Gilead Sciences (GILD, Financial) took a hit on Friday, December 19 after Express Scripts (ESRX, Financial) gave AbbVie (ABBV, Financial) exclusive distribution of their hepatitis C drug, Viekira Pak. The drug received FDA approval on December 19 and is a considered a direct competitor of Gilead’s Harvoni regimen. Express Scripts manages prescription benefits and this decision makes AbbVie the sole distributor of hepatitis C drugs for Express Scripts’ 25 million subscribers. Starting January 1, Express Script beneficiaries will no longer be covered to purchase Harvoni.
Express Scripts values affordability for patients, which played a role in their decision to choose AbbVie’s hepatitis C regimen over Gilead’s. Steve Miller, M.D., senior vice president and chief medical officer of Express Scripts, stated, “Express Scripts and AbbVie have a single focus: do what’s right for hepatitis C patients… This agreement marks a fundamental change in how sustainable access and affordability will be delivered to hepatitis C patients.”
Gilead’s Harvoni regimen costs more than $94,000 wholesale for the 12-week course. Viekria Pak is approximately $83,000, though Express Scripts announced that there will be a discount on this wholesale price. Express Script’s press release stated, “Unlike pricier hepatitis C medications that many U.S. payers were covering only for patients experiencing stage 3 or 4 liver disease, Viekira Pak will be available for all clinically appropriate plan members covered by the Express Scripts National Preferred Formulary.”
On December 22, analyst Michael Yee of RBC Capital commented on the development. Yee currently has an Outperform rating on GILD, and he noted that “GILD is likely to be weak today” due to Express Scripts’ announcement. Yee continued, “This is not a completely surprising announcement and had been discussed as a possibility by investors since ABBV regimen was inferior and would have difficulty getting share.” Regarding the potential financial impact the agreement will have on Gilead, Yee noted “if we estimate that ESRX may broadly cover 20-40% of private pay covered USA lives, then multiply times 70% for GT1, this might theoretically impact up to 15-25% of the GILD Harvoni market, or up to $1-2B+ in share.” Yee has not changed his rating in light of the new agreement. Yee has rated GILD 16 times since April. He has a 88% success rate recommending the pharmaceutical company and a +25% average return per Gilead recommendation.
Michael Yeehas rated many pharmaceutical companies in the past year. He has rated Infinity Pharma (INFI) 13 times since May with an overwhelming +43.2% return per INFI recommendation. Additionally, he has rated Vertex Pharmaceuticals (VRTX) 5 times since June, with a +18.2% return per VRTX recommendation. Shrewd recommendations such as these have helped earn Yee a 79% overall success rate with an average return of +17.9% per recommendation.
Gilead may have taken a hit by Express Scripts and AbbVie, but will it have a significant impact on share prices?
The top analyst consensus for GILD on TipRanks is Strong Buy.
To see more recommendations for GILD, visit TipRanks today.
Sarah Roden writes about stock market news. She can be reached at [email protected]
