“There was a well-recognized reality that growth in Gilead’s pipeline — particularly with Hepatitis C and HIV — was slowing” according to BMO’s Ian Somaiya. “This made investors ask management to take action.”
Kite is one of the key developers of CAR-T, a cancer treatment that uses a patient’s own immune system to fight tumors. And its lead Kite drug, Axi-cel, is expected to win regulatory approval this coming fall.
But with treatment estimates of $250,000, according to SunTrust, concerns about high costs could raise eyebrows.
The Hepatitis C precedent
Gilead’s $11 billion purchase of Hepatitis C drug maker Pharmasset in 2011 brought it to the center of the drug pricing debate. It benefited from strong sales of its lead drug, Sovaldi, which cost more than $80,000 for the 12-week treatment.
Shares rallied 280% in the two years following the deal announcement, compared to a 45% rise for the S&P 500, largely on prospects for high Hep C sales, according to analysts. And sales of the Hep C treatments were indeed the main driver — $33 billion in sales of Sovaldi (along with Harvoni, Epclusa and Vosevi) in 2014 through 2016.
Long-term look for Gilead
Analysts say that while high pricing may not be in focus quite yet, it could be down the road as Kite expands beyond its current indication of refractory Non-Hodgkins Lymphoma (NHL).
While Kite only registered $22 million in revenue in 2016, revenue estimates (including a $3.6 billion estimate from SunTrust) is based on broader indications for the drugs.
“Right now, the indication is for refractory lymphoma, or where patients have failed multiple lines of therapy which means there is less focus on the specific price tag,” Somaiya said. “If the goal longer-term is to move into first and second line therapy, the pricing could become more of a concern.”
Nicole Sinclair is markets correspondent at Yahoo Finance
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