The planned price tag for Gilead’s COVID-19 drug offers the most concrete evidence yet that the company does mean to make a business out of it, a standard-setting move that could influence other companies working on treatments and vaccines.
On Monday, the California-based biotech said it will charge between $2,340 and $3,120 for the typical five-day course of remdesivir, an antiviral therapy which the Food and Drug Administration cleared for emergency use to treat infections from the new coronavirus. For commercially insured patients who need longer, 10-day treatment, the price would rise as high as $5,720.
Wall Street analysts crunched the numbers and found even the lower end of Gilead’s range could result in a billion-dollar operating profit for the company, after accounting for the roughly $1 billion Gilead expects to spend on development and manufacturing.
Until this week, Gilead hadn’t provided much information on pricing or whether remdesivir would end up being a meaningful source of revenue for the company. On an earnings call in late April, CEO Daniel O’Day said his team knew the drug needed to be affordable and accessible to patients around the world, but it was also aware that “when we get into millions of doses, we have to have a sustainable economic model that works.”
To some analysts, the current pricing plan allows Gilead to recoup its initial investment but not much more. The team at Raymond James, for example, sees remdesivir sales peaking at $900 million in 2021, then rapidly falling over the next decade as better treatments and, eventually, vaccines become available. RBC Capital Markets analysts also expect the drug to be a limited contributor to Gilead’s business over the long-term for similar reasons.
Others are more bullish, though. SVB Leerink’s revenue forecast of $1.5 billion in 2020 is 89% above consensus, while its forecast for 2021 is almost five times higher.
The investment bank said its expectations were lifted by Gilead’s improving capacity to manufacture remdesivir and its pricing of the drug outside the U.S., which is $390 per vial. In the U.S., the price Gilead will charge for most patients is $520 per vial, although it will sell remdesivir for $390 to select government purchasers like the Department of Veterans Affairs.
Cantor Fitzgerald also sees Gilead’s pricing as a signal of remdesivir’s market opportunity.
“Based on this update, we view remdesivir as a real commercial drug for Gilead in the near-term and also note that it is likely to have long term potential as well, as the U.S. experiences a resurgence of COVID-19 cases,” analyst Alethia Young wrote in a June 29 note to clients.
Yet earning a profit on a COVID-19 therapy could expose Gilead to some of the same criticism it’s faced over its HIV and hepatitis C therapies. More broadly, remdesivir’s pricing and how it plays out could be instructive for the dozens of companies developing their own drugs for COVID-19.
Notably, remdesivir’s price falls close to the $2,500 to $2,800 price range that ICER, an influential watchdog on drug costs, said would be cost-effective, provided the drug offered some mortality benefit. Remdesivir has yet to do that, though it has been shown to help patients recover from COVID-19 faster than supportive care. Gilead, in discussions around remdesivir’s price, has pointed to one estimate that each COVID-19 patient discharged early saves a hospital $12,000.
“The good news is that a positive profit contribution will be possible, and even likely, for other treatments such as antibodies and novel antivirals for COVID. Even vaccines will reference this pricing as part of the justification for pricing that we expect to be ‘influenza like’ for COVID,” wrote Geoffrey Porges, an analyst at SVB Leerink who has pressed Gilead on why it should treat COVID-19 as different than its other businesses.
“The bad news is that the pricing is remarkably low, given the direct medical value, not to mention the societal value, provided by remdesivir. This will change all future expectations for the treatment of this disease, and may also influence pricing in other diseases.”
A number of major vaccine developers, such as AstraZeneca and Johnson & Johnson, have said they don’t intend to profit from their products, if successful, for at least as long as the pandemic period lasts.