Owning shares in a company that comes up with a successful treatment or vaccine for Covid-19 might not be the bonanza investors anticipate.
An indication of what might be in store for pharma companies and their shareholders was illustrated last Friday when, despite reporting sales and earnings that exceeded expectations, Gilead Sciences (GILD, Financial) saw its stock decline nearly 5% to just under $80. In fairness, the overall market was down big.
The Foster City, California-based biotech giant has been on a roll lately, hitting a year-to-date high of nearly $86 in mid-April when news of the potential of its coronavirus treatment remdesivir began to surface. This past week, just days after it was reported that the drug proved effective in a small study, the U.S. Food and Drug Administration granted it an emergency use authorization.
Analysts weren’t impressed. The three who chimed in gave price targets of $84, $80 and $77, hardly a ringing endorsement. Obviously, many agree that the success of remdesivir has already been priced into the stock. They also recognize that while the drug might be the best treatment available now, it’s hardly the magic bullet, which limits its commercial potential.
Gilead plans to donate its current supply of 1.5 million doses, enough to treat about 140,000 patients, and expects to have at least one million doses by year’s end.
The issue of how to price treatments and vaccines for the coronavirus is likely to prove a sticky one. Companies won’t want to appear as mercenaries, capitalizing on a worldwide humanitarian crisis for the sake of profit, yet they and their shareholders deserve to be rewarded.
Just last week, a small pharma company took a step akin to selling lifeboats to passengers on the Titanic. Tiny Jaguar Health Inc. (JAGX, Financial) more than tripled the price of its antidiarrheal medication Mystesi shortly after asking the FDA to grant the drug emergency use for Covid-19 patients, reported Axios.
The list price of a 60-pill bottle of Mytesi was nearly $670 going into this year, but on April 9 the company hiked the cost to more than $2,200. The FDA denied Jaguar’s request to approve the drug.
Though it’s only one instance, the Jaguar Health price increase played right into the hands of an industry critic who was quoted in an article on the website, The Intercept.
“Pharmaceutical companies view Covid-19 as a once-in-a-lifetime business opportunity,” Gerald Posner, author of “Pharma: Greed, Lies, and the Poisoning of America,” said. The global crisis “will potentially be a blockbuster for the industry in terms of sales and profits,” he said, adding that “the worse the pandemic gets, the higher their eventual profit.”
That’s probably an overstatement. Investors might be hoping for hefty profits, but more reasonable returns are much more likely. Few companies can afford to incur the wrath of the public and the government by appearing to capitalize on human misery.
Though most drugs currently in clinical trials to fight Covid-19 can be made cheaply, they can sell for hundreds of times the price. These are drugs that are approved to treat other conditions, but would be “repurposed” as Covid-19 medications.
| Drug | Estimated cost price (course) | Estimated cost price (day) |
|---|---|---|
| Remdesivir (10 days) | $9 | 93 cents |
| Favipiravir (14 days) | $20 | $1.45 |
| Lopinavir/ritonavir (14 days) | $4 | 28 cents |
| Hydroxychloroquine (14 days) | $1 | 8 cents |
| Chloroquine (14 days) | 30 cents | 2 cents |
| Azithromycin (14 days) | $1.40 | 10 cents |
| Sofosbuvir/daclatasvir (14 days) | $5 | 39 cents |
| Pirfenidone (28 days) | $31 | $1.09 |
Source: A. HILL, et al., Journal of Virus Eradication, 2020
In a study published in the Journal of Virus Eradication, researchers recommended that treatments proven effective in well-powered clinical trials should be made available worldwide at prices close to production costs; there should be parallel manufacturing by at least three different companies for each product; there should be no patent barriers preventing mass production and results and databases from all trials should be fully accessible.
Even some—surprise—financial firms are asking companies to put patients over profits.
In a letter to more than 15 large drug makers — including Roche (RHHBY, Financial), Gilead and Johnson & Johnson (JNJ, Financial) -- more than three dozen asset managers, pension funds and insurers asked the industry to cooperate in the fight against Covid-19, according to an article in STAT News. They want the companies to share research data and provide worldwide access to treatments, tests and vaccines.
Disclosure: The author holds a position in Gilead and Johnson & Johnson.
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