lowering the price by 30% does seem like a reasonable estimate, but if you consider that Sovaldi's gross margin is a whopping 90%, and that there will be 3 or 4 competitors coming to into the market (who would gladly take 50% GM)....the price may be lowered by much more than 30%...JMHO.
If you go back to 4th quarter 2013, GILD earned $0.55. Last quarter, it's $2.36, which means Sovaldi makes up around 77% of GILD's earnings. That's a big big chunk. It seems investors are waiting to see how competition will affect earnings.
A Morningstar article states:
"Gilead saw $6.5 billion in revenue in the quarter, with $3.5 billion from Sovaldi alone. This pushed non-GAAP gross margin to 88.7% and operating margin to 71.9% in the second quarter, as Sovaldi likely sees gross margins near 90%, and Gilead's overall operating expenses are growing more slowly than revenue."
GILD earned $3.66 billion (or $2.20 per share) so at 90% gross of $3.5 billion in sales would mean $3.15 billion of the $3.66 was earned by Sovaldi.
If competition comes and reduces Sovaldi's gross margin to 50% (worse case scenario) then this quarter GILD would have earned $2.26 billion or $1.36 per share. What do you think?
The percentage of the $2.20 earnings belong to Sovaldi alone? I know Sovaldi sales was $3.48 billion out of the $6.41 billion total, but I'm looking for percentage of the earnings. Anybody know?
Looks like no breakout before earnings. Need to go thru 90.56 for that to happen.
no, I don't think this is old news (even though it does sound like it). From my understanding, previously, there was a letter calling for the gov't to look into the Gilead's pricing. The gov't has never contacted Gilead DIRECTLY until today.
Thanks for the link Hew. Anybody know the possible outcome from this? Has there ever been a case where the gov't was successful in forcing a drug company to re-price?
I'm out for now too. I think this letter is significant because it is addressed directly to Gilead. And Gilead will now have to respond. They will have to address this at their earnings conference call too.
After a long hard battle at the 83.01 ± 1.16 range, GILD finally broke thru last week and has now quickly moved up almost 7% (breakout). There is now resistance forming at 87.79 ± 1.23, type Single, strength 2. GILD came close today, but was not able to break this resistance. Even if she breaks this area, I suspect there will be heavier resistance at the $90 area. It's doubtful she can break this area before earnings. After earnings...it's anybody's call.
Silver on its way to 22. Broke free of not only 20 resistance, but also 20.50...youtubeDOTcom/watch?v=sNgnksIa0Ew
Excerpt regarding Europe:
The fact that we shorten the duration to 12 weeks made a huge difference to patients and to doctors and their staff in terms of amount of time that difficulty of getting patients to these regimens. So we are seeing very high completion rates of therapies during the first quarter.
Likewise in Europe, we saw a rapid uptake of the product, even though we are on the market only in Germany and France. I think it's arguably one of the best launches in Europe because the roll-out takes longer to get pricing and reimbursement. We had very favorable placement of the EASL guidelines, which is important for how the medicine we use across the European Union and for the European discussions. And we are going through pricing and reimbursement discussions across the European Union right now.
For example, we are under nice review, but importantly we just got a rating of ASMR 2 in France. One is the highest rating very hard to get. Two means it's a highly innovative product and a very good rating for the value that we have for this product. And will help with our negotiations on pricing in France. And then importantly in Scotland, we just got viewed as being cost effective within the Scottish Healthcare System and the Scottish Healthcare System is typically one of the toughest to get that kind of designation. So I think it bodes very well for the remainder of the pricing and reimbursement negotiations across Europe
This really is a MUST READ:
Here excerpt about pipelines:
I mentioned in our pipeline. Our pipeline has gotten so full, it takes 3 slides to go through it. I never thought that we would have these many things going this quickly. But the pipeline in fact is quite full.
Excerpt concerning price of Solvaldi:
There has been a lot talk about the cost per pill of Sovaldi, but I want to talk about the cost per regimen. A regimen is a number of medicines that it takes to fight the disease. And if you look at the cost of Sovaldi plus pegylated interferon plus ribavirin for 12 weeks, it cost just over $94,000.
If you look at the cost of care for other comparable medicines around the market either Telaprevir, which is typically used for 8 weeks plus 4-day weeks of PEG/RBV or Sofosbuvir, which can be used between 24 and 48 weeks. You see that both of those are in excess of $96,000 almost $97,000 on average between the two. So the cost of care for Sovaldi containing regimen is actually less than what the current standard of care with the – standard of care had been prior to the launch of Sovaldi. So we had felt that this is a very reasonable price based on the fact that its simpler, it's shorter and let's not forget the SVR rate, the rate of care is higher on this regimen than on the other regimen as well.
* He also says only 40000 patients with HCV out of 1.7 million (in US) were being treated in the last 12 months, which is a negative "reflection of the difficulty of the other medicines". "So the volume remains the issue, what we do about all these patients who suddenly can seek care and want to seek care because the disease can be managed much more easily than it could be before. And this will manifest itself even more when the fixed dose combination comes to market in the future we eliminate the need for PEG/RBV."
There's much much more....MUST READ
considering the deal today doesn't mean much in terms of new competition for Gilead (at least for another 4-5 years). The price just bounced again above the 80.01+-1.12 support.
had this to say:
Piper Jaffray says shares of Gilead (GILD) may come under pressure following Merck's (MRK) acquisition of Idenix (IDIX). Piper says Merck could be in a stronger position for its patent litigation against Gilead's Sovaldi but notes that consensus estimates for Gilead have always included an owed royalty for Sovaldi.
anyone care to share more info on this patent litigation? what's it worth?