Shares of Gilead Sciences (GILD) declined 2.58% to close the trading session on Sep 15 at $100.99 following its licensing deals on generic Sovaldi (sofosbuvir) with seven India-based generic players including companies like Mylan (MYL), Cadila Healthcare and Cipla. The deals aim to make Gilead’s blockbuster hepatitis C treatment available to patients in 91 developing nations at a hugely discounted price.
Through the deals, Gilead aims to expand the access of the drug to more than 100 million hepatitis C patients, thereby covering more than half the global population affected by this dreaded disease. The deals also cover Gilead’s hepatitis C candidate – a fixed-dose combination of ledipasvir and Sovaldi – which is currently under FDA review (target date: Oct 10). The combination is also under review in the EU.
Following the transactions, the generic companies will receive a technology transfer so that they can manufacture low-cost versions of Gilead’s hepatitis C therapies for developing markets. Moreover, the companies have the freedom to set the price of the low cost versions in the developing markets. The companies will pay royalties to Gilead on product sales. The news does not surprise us as rumors to this effect have been in the air for the last few days (read more: Gilead Down on Likely Sovaldi Generic Deal in Poor Nations).
Gilead’s move has however attracted criticisms due to the exclusion of countries like China, Ukraine, Thailand, Mexico and Brazil under these deals, as per media reports. We expect investor focus to remain on how the licensing deals work out going forward.
The branded version of Sovaldi has performed exceedingly well ever since its U.S. launch in Dec 2013. The high price of the drug in the U.S. ($84,000 for a 12-week course) has however earned censure from many quarters.
Gilead carries a Zacks Rank #1 (Strong Buy). Stocks such as Endo International (ENDP) and Allergan (AGN) also carry the same rank.
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