After Gilead Reveals Remdesivir Pricing, Analyst Sees Significant Revenue Upside

After Gilead Reveals Remdesivir Pricing, Analyst Sees Significant Revenue UpsideThe coronavirus marches on, but healthcare names all over the world are fighting back. Earlier this week, Gilead Sciences (GILD), the manufacturer of COVID-19 antiviral drug remdesivir, revealed the pricing plan for the treatment. A five-day course of remdesivir will be sold to governments of developed nations, including the US, for a price of $2,340 ($390 per vial). US private health insurers will need to fork up $3,120 for the course ($520 per vial). Other countries, though, will find it difficult to get hold of the treatment over the next three months. The Trump administration has purchased over 500,000 doses, which amounts to July’s total production, and 90% of Gilead’s expected output in August and September. Overall, in 2020, Gilead expects to produce up to 3 million courses. Next year, Gilead has set its sights on manufacturing between 600,000 and 800,000 courses a month. The news was greeted with enthusiasm by investment firm Leerink Partners. Firm analyst Geoff Porges increased the revenue forecast for Gilead “by $800 million to $1.8 billion in each of the next three years.” The 4-star analyst expects remdesivir to bring in $1.5 billion of revenue in 2020, rising to $8.5 billion in 2021, and $8.6 billion by 2023. Hopefully, remdesivir’s impact will match that of the 2014 launch of its first HCV medicine, Sovaldi, when GILD’s share price increased by 54% in the three quarters following the launch. Porges said, “We regard the price and its announcement positively, as it establishes a responsible but still profitable benchmark for COVID treatment pricing generally and for Gilead specifically. The strengthened RDV supply together with higher RDV pricing for ex-US markets and stockpiling has significantly increased our forecasts for RDV.” However, Porges tempered expectations by adding, “This forecast still has massive uncertainty given the varying trajectory of the pandemic around the world, the outlook for vaccines, the prospects for alternative and additional medicines, and the appetite of government agencies for stockpiling.” As a result, Porges reiterated an Outperform rating and boosted the price target to $95 (up from $94). Gains of 25% could be heading investors’ way should Porges’ forecast materialize over the coming months. (To watch Porges’ track record, click here) The rest of the Street takes a cautiously optimistic approach to Gilead. A Moderate Buy consensus rating is based on 11 Buys, 12 Holds and 4 Sells. There’s upside of 6%, should the $80.22 average price target be met in the year ahead. (See Gilead stock analysis on TipRanks)

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