Late last week, Gilead Sciences Inc. GILD received disappointing news after a jury in the U.S. District Court, Northern District of California ordered the company to pay $200 million to Merck & Co. Inc. MRK for the damages related to a patent infringement involving its hepatitis C virus (HCV) drugs.
The compensation for damages came on the heels of the jury’s decision early last week that ruled against Gilead in a patent dispute related to its sofosbuvir-based medicines for the treatment of HCV, including its blockbuster drugs, Sovaldi and Harvoni.
The jury ruled in favor of Merck and Ionis Pharmaceuticals, Inc. IONS, thereby upholding the validity of the two patents. With Merck and Ionis being co-inventors on the disputed patents, Ionis is eligible to receive 20% of the damages awarded to Merck.
Though the jury’s order was a huge boost for Merck, the amount of damages fell significantly short of what the company had expected. In fact, Merck had asked for damages amounting to 10% from sales of the two drugs in the U.S. from 2013 through the end of 2015, which totaled a staggering $23.1 billion.
Gilead, on the other hand, plans to appeal to the decision if the judge upholds the jury's verdict. Meanwhile, the Court will hold a separate hearing to consider royalties owed by Gilead on sales beginning Jan 1, 2016.
We note that Merck has been looking to capture a share in the highly lucrative HCV market. In January, the company gained FDA approval for its HCV drug, Zepatier. Since HCV drugs like Sovaldi, Harvoni and Viekira all come with premium price tags, Merck took the HCV market by surprise by setting a lower list price for Zepatier.
Currently, Gilead is a Zacks Rank #2 (Buy) stock. Actelion Ltd. ALIOF is another favorably ranked stock in the health care sector, sporting a Zacks Rank #1 (Strong Buy).
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