Once the hep C titan, Gilead is now fortifying its still dominant HIV business with a round of list price hikes it took over the weekend under new chief Daniel O’Day, as the drugmaker looks to stem more than two years of shrinking sales revenue.
The biotech has hiked prices on its big ticket products — including its arsenal of HIV drugs, but excluding its HCV franchise and CAR-T therapy Yescarta — by 4.9%, which is in line historically with its practice of raising prices annually in the first quarter, according to Cowen’s Phil Nadeau.
The hikes come at a time when pressure to rein in drug prices is mounting, with Congress conducting hearings to unpack the role drugmakers and pharmacy benefit managers play in skyrocketing out-of-pocket costs. Meanwhile, the Trump administration has issued a string of proposals to curb prices, including importing prices from overseas, and HHS secretary Azar has implied “naming and shaming” tactics will be employed against drugmakers who raise prices.
The price increases are notable as various big drugmakers — including Roche, Pfizer $PFE, Novartis $NVS and Merck $MRK — had pledged not to raise prices until the end of 2018, after Trump’s drug pricing blueprint was unveiled in the second quarter of 2018.
“Gilead’s price increases would seem to signal a return to its historical practices with the calendar’s turn to 2019,” Nadeau said. “Gilead will not recognize the full magnitude of the price increases because of discounts, rebates, and regulations. The price to Medicaid, for example, can only increase by an amount related to inflation. Nonetheless, these price increases give us additional confidence in our 2019 U.S. HIV franchise estimates, which project 16% Y/Y growth in revenue.”
Gilead’s 2019 forecast — issued last month — implied “product sales growth of -2% to +0.5%, suggesting that overall Gilead‘s business has finally plateaued,” Nadeau added.
So newly crowned O’Day has his work cut out for him: Gilead’s hep C franchise is melting away, its $12 billion buyout of Kite (and its CAR-T therapy Yescarta) remains an open question mark and its big bet on late-stage NASH drug selonsertib has hit a major roadblock. What remains is its stable, foundational HIV business — which may have postponed its best-before date with new, easier-to-use therapies — and piles of cash in its coffers lying around for the next meaty buyout deal.
“We believe the HIV business’ fundamentals are sound. The rapid conversion of patients from TDF to TAF-based regimens plus Biktarvy’s strength in the treatment naïve setting should keep Gilead the market leader despite emerging competition and patent expirations starting in 2021,” BMO’s Matthew Luchini wrote in an initiation note last week.
The 2019 price increases include “Atripla (to $2,857.55/month), Biktarvy (to $3,089.99/month), Complera (to $2,812.13/month), Descovy (to $1,757.90/month), Genvoya (to $3,089.99/month), Odefsey (to $2,812.13/month), Stribild (to $3,241.40/month), Truvada (to $1,757.90/ month), Letairis (to $9,708.09/month), Ranexa (to $614.60/month), Vemlidy (to $1,118.88/ month), Viread (to $1,196.09/month), Zydelig (to $1,0717.14/month) and Hepsera (to $1,484.35/month),” according to Nadeau.
These 14 drugs — including 6 blockbuster treatments — accounted for a bulk of Gilead’s 2018 revenue.
“Gilead has increased list prices of these medicines…to reflect the rising costs of goods and services necessary to produce groundbreaking medicines. This increase is lower than the standard measure of health care inflation, based on an independent estimate of growth in health expenditures, and is lower than price increases in previous years,” a Gilead spokesperson told Endpoints News.
“These prices also do not impact the price freeze that Gilead established for state AIDS Drug Assistance Programs (ADAPs) in 2008, which is effective through 2019.”
The hikes come at a time when Gilead’s executive team is in a state of influx. O’Day’s first week as new CEO was marked by the departure of one of the company’s top research scientists, executive VP of oncology Alessandro Riva. The executive team has suffered somewhat of an exodus recently, with the exits of CEO John Milligan, Chairman John Martin and R&D chief Norbert Bischofberger. Bischofberger’s replacement, Andrew Cheng, stepped up as chief medical officer before he left as well to run his own biotech.
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