Updated: Estimating a US price tag of $5K per co

Updated: Estimating a US price tag of $5K per course, remdesivir is set to make billions for Gilead, says key analyst
Natalie Grover
Reporter 6/3/20
Data on remdesivir — the first drug shown to benefit Covid-19 patients in a randomized, con-trolled trial setting — may be murky, but its maker Gilead could reap billions from the sales of the failed Ebola therapy, according to an estimate by a prominent Wall Street analyst. However, the forecast, which is based on a $5,000-per-course US price tag, triggered the ire of one top drug price expert.
Gilead has been reticent about its pricing plans, with company chief Dan O’Day emphasizing the need for the company to be responsible. “I don’t think there is a precedent for this,” he said in response to the question posed by SVB Leerink analyst Geoffrey Porges in a post-earnings conference call last month. “There is no rule book out there, other than that we need to be very thoughtful about how we can make sure we provide access to our medicine to patients around the globe and do that in a sustainable way for the company.”

But on Wednesday, Porges said he expected the drug to carry a list price of $5000 per course in the United States, above the cost-effective estimate of $4,500 generated by ICER, an increasingly influential watchdog that typically favors a conservative approach to pricing based on an intervention’s benefit beyond the standard-of-care. Although Remdesivir is the only therapy so far to show a statistically significant impact in helping hospitalized Covid-19 patients with moderate-to-severe disease recover faster (by four days) in a randomized, placebo-controlled study — the gold-standard for benefit-risk calculations — it is by no means a silver bullet. The drug, which thwarts an enzyme the virus relies on to replicate, did not reduce the rate of mortality by a statistically significant extent in the trial.

ICER broke its usual practices in early May to conduct its own analysis based on ‘raw and immature data’ to come up with two different ways to reasonably price for the drug. The first, the ‘cost recovery’ model in which the manufacturer prices the therapy on the basis of the minimum costs of production, chalked up a price of $10 for a 10-day course. (Although data from a Gilead trial suggest a 5-day regimen of the drug is as effective as the 10-day course).

But under the traditional cost-effectiveness model, which looks at incremental health benefits and costs within the health system, the company would be justified to sell the same regimen for $4,500, ICER suggested in a draft report. Michael Carrier, a Rutgers University law school professor who specializes in intellectual property, in a previous interview with Endpoints News noted that there isn’t any simple formula to calculate the ideal price of a therapy. “Just psychologically, a cost or price below $1,000 seems to be more affordable. I don’t think it’s going to be $10. I don’t think it’ll be close to $4500.”

“Wall Street expecting $GILD to extract maximum revenue exceeding treatment value. No one should be surprised by this,” said Peter Bach, the director of Memorial Sloan Kettering’s Center for health policy and outcomes, in response to Porges’ estimate of $5,000-per-course on Twitter. Gilead rose to prominence by vaulting HIV to the ranks of a chronic disease and as the purveyor of impossibly high-priced, but fantastically effective, hepatitis C drugs. Originally priced at $1000 per hep C pill, the US drug maker drew the wrath of lawmakers and policymakers at home and abroad, and as a result of intense scrutiny and emerging competition, prices were revised downwards.

Porges, on Wednesday, estimated the drug will be priced at $4000 per course in Europe and $2000 for the same regimen in other markets. Overall, the forecast global remdesivir sales is $1.9 billion by the end of this year, jumping to $6.7 billion in 2021 (bolstered by government stockpiling) and then in a range of $5.8 to $6.9 billion in later years. “This forecast has more uncertainty than any that we have published in the last 15 years, but it reflects our view that remdesivir works, it saves medical and societal costs by shortening disease duration and reducing severity, and we believe that Gilead will be permitted to capture reduced but still real profitability from the product,” he wrote. “We also believe that SARS-nCoV2 (the virus behind Covid-19) is not going away, or being eliminated by vaccination (we do forecast gradual adoption of vaccination, but in our view that is unlikely to stop government stockpiling of remdesivir).”

Len Yaffe, a former sell-side medical analyst who now works with a healthcare hedge fund called Stoc*Doc Partners, said he does not see the US data on hospitalized/in ICU/on ventilator patients support Porges’ revenue projections. “I expect the number of daily new cases to drop significantly by September from the current run rate of 20,000 to under 10,000 — by the late fall, there should be drugs effective in earlier treatment that would minimize the moderate to severely ill patient group,” he told Endpoints. “So, if I am wrong, and there is a significant second wave ( I expect a minor one) this winter, then he (Porges) could be correct…but I think he needs to base his case on the possible introduction of other pharmaceuticals, a new case projection (not just that the virus is “not going away”), and not on gradual adoption of vaccination.”

Porges’ forecast is certainly generous, but the data on the drug are less than stellar. Only days ago, Gilead unveiled data from an open-label late-stage study that generated more questions than answers on the magnitude of remdesivir’s benefit in the treatment of Covid-19. In this trial, patients classified as having moderate disease were 65% more likely to show “clinical improvement” on a five-day regimen compared to those given standard-of-care — but not those on the 10-day course.

The dichotomy perplexed Baird analyst Brian Skorney. The data “continue to indicate a very marginal clinical benefit, while reinforcing that a benefit is likely more than random noise,” he wrote in a note. “We continue to believe that both the commercial opportunity for Gilead and the macro benefit of remdesivir to society, at large, is very limited.” Gilead, meanwhile, has already donated 200,000 course supply of remdesivir to governments, invested $50 million in developing the drug, and expects to spend another $1 billion as it ramps up further development and manufacturing of remdesivir. The company plans to disclose its pricing plans in the coming weeks and kick off commercial sales in the second half of this year.

Stockpiling could begin in late 2021, after drug production has been amped up, Porges said. “We assume that peak profitability (operating margin) for remdesivir is 19% in 2021, and then declines as more and more revenue comes from heavily discounted (80%+) government stockpiling purchases. As a result of the much lower profitability compared to Gilead’s core business, the incremental profit contribution is relatively small (+2% in 2020, +10% in 2021 and then +1-4% in later years).”

In the United States, days after topline data on the drug were announced by the NIH, the FDA issued a quick emergency use authorization (a temporary move to allow access to the drug while its maker gathers more data in order to pursue standard approval). In the European Union, the medicines regulator has recommended expanding compassionate use of remdesivir in severe Covid-19 patients, while a rolling review of the drug is ongoing. In the UK, the Gilead has struck a deal with the government to supply the drug for certain Covid-19 patients.