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Wednesday, February 8, 2023

Remdesivir Data Leaves Gilead Stock Well-Positioned to Rally

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Recent data on Gilead’s (NASDAQ:GILD) treatment for the novel coronavirus, remdesivir, along with multiple indications that  demand for the drug is strong, have caused me to continue to be upbeat on GILD stock.

gilead (gild stock) website

Source: Casimiro PT / Shutterstock.com

Further, a key supply deal involving remdesivir and an overreaction to negative news about another one of the company’s drugs have also increased my bullishness on the shares.

Remdesivir Data and Demand

As has occurred multiple times since the pandemic started, Gilead recently released positive data on remdesivir, but the media and much of the Street expressed tremendous skepticism about the (in my view) rather clear information.

Specifically, a study of patients with moderate cases of the coronavirus who received remdesivir for either five days or a median average of six days “found that 11 days after starting treatment, 65% of the… {six-day} remdesivir patients, 70% of the 5-day patients and 60% of the standard care patients had left the hospital,” according to Daily Clinical News.

Moreover, those “treated with the antiviral drug for up to five days demonstrated significantly higher odds of improvement in certain areas, such as whether or not they needed supplemental oxygen, as compared to patients given standard treatment.”

The media has chosen to emphasize that, after 11 days, those who received the drug for an average of six days did not show a statistically significant improvement versus patients who were not treated with remdesivir.

But, in my (non-expert) opinion, the data after 28 days, like the previous trials involving remdesivir, shows that the drug provides a clear and convincing benefit for patients with a moderate case of the coronavirus. Specifically, 1.3% of the patients who received the drug died, versus 2% of those who did not receive it. And just 0.25% of the patients who received remdesivir were on ventilators or an ECMO machine, versus 2% for those who did not receive the drug.

About 1.5% of those who received remdesivir either died or were being helped to breathe by a ventilator or ECMO machine, versus 4% for those who did not receive the drug. In other words, patients who were not given the drug were more than twice as likely to be in very bad shape after 28 days as those who did receive it.

Whether or not that difference is technically statistically significant, the discrepancy sounds very meaningful to me. And if a member of my family were hospitalized or I was hospitalized with the coronavirus, I would certainly want them to receive the drug. If I was in charge of deciding whether to give hospitalized patients with moderate coronavirus remdesivir, I would certainly do so based on this data.

Finally, nearly 90% of those who received the drug were out of the hospital after 28 days, versus 83% for the control group. In other words, patients who were given the drug were over 7% more likely to be discharged from the hospital than those who did not. Taken together with other, previous data which has shown clear benefits for patients who receive remdesivir, it’s clear to me that the drug meaningfully helps patients who have the coronavirus.

The actions taken by multiple countries show that they have a similar view. For example, the FDA and the EU have both granted emergency use authorizations for the drug, while both the EU and the U.S. have made deals to buy significant amounts of the drug from Gilead.

Other nations, including India, Japan and South Korea, have either approved remdesivir outright or issued an emergency approval of it.

Supply Constraints Appear to Have Been Solved

Previously, I had been concerned about Gilead’s ability to manufacture enough remdesivir to meet demand ahead of a likely vaccine for the coronavirus. But on Aug. 7, Gilead announced a deal with pharma giant Pfizer (NYSE:PFE).

Under the agreement, Pfizer agreed to manufacture remdesivir. Together, I believe that the companies will be able to produce enough remdesivir for 4 million patients by the end of the year, versus Gilead’s previous estimate of 2 million. Since Europe and the U.S. together had about 9.5 million cases as of Aug. 25, and a second wave of the virus is likely to occur in the fall in at least some regions before a vaccine is ready, Gilead should have no trouble selling all 4 million courses of remdesivir.

If Gilead receives an average of $2,500 per patient (in developed countries, the drug has a price tag of $3,100 for private patients and $2,340 for governments), that works out to $10 billion of revenue for Gilead. Since the company’s 2019 revenue came in at $22.45 billion, $10 billion of revenue should be more than enough to boost GILD stock.

Further, the $10 billion estimate excludes royalties that the company will likely receive from generic drug makers that are selling remdesivir in developing nations.

Finally, the FDA recently rejected Gilead’s application for the rheumatoid arthritis drug filgotinib, which was developed by the company’s partner, Galapagos (NASDAQ:GLPG). The agency said it needed data on the drug’s impact on sperm, and its statement caused an intraday decline of 7% in GILD stock.

But since the illness most commonly begins in middle age and affects more women than men, according to the Mayo Clinic, most patients with the illness will probably not be worried that much about its impact on sperm. Consequently, I expect the FDA to approve the drug sooner rather than later. So, I believe that those who hold GILD stock for a year will see the shares get a meaningful boost from the approval of filgotinib as well as the revenue generated by remdesivir.

The Bottom Line on GILD Stock

The data on remdesivir shows that the drug is an effective treatment (albeit not a cure) for the coronavirus, and evidence suggests that countries are prepared to use it on their coronavirus patients. The deal with Pfizer should eliminate most of the supply constraints that would have limited sales of the drug.

Meanwhile, the FDA will, in all likelihood, approve filgotinib within the next year. Given these points, I continue to recommend that investors buy GILD stock.

As of this writing, Larry Ramer owned shares of GILD stock. Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been Roku, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.

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