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Gilead anti-viral drug remdesivir: modest returns for modest benefits

remdesivir financial impact

The first coronavirus treatment in the world to get official approval, remdesivir, may not result in a financial windfall for its developer Gilead Sciences, according to analysts.

Its recent emergency use approval, granted by the US Food and Drug Administration (FDA) on Friday, made remdesivir the pioneer drug to treat the novel coronavirus, but analysts warned investors not to get their hopes up about the financial uplift this will have for the American biotech firm.

The drug knocks around three to four days off a two-week recuperation period after falling seriously ill from coronavirus.

The improvement in recovery times “doesn’t seem like a knockout 100 percent,” Dr Anthony Fauci, America’s top virus expert, conceded, but “it is a very important proof of concept, because what it has proven is that a drug can block this virus.”

A note released last Wednesday by SVB Leerink, an investment bank specialized in the health care sector, emphasized that the drug would have “limited economic value to the company and the stock”.

Analysts from Bank of America (BofA) and Morgan Stanley have also categorized the financial impact of remdesivir as “not that impressive”, after considering the cost of the treatment, the potential size of the market, and the development of competing drugs.

Gilead Sciences (GILD) shares closed the week at $79.95 after sliding 4.8%, following the comments of the firm’s chief executive Daniel O’Day, who anticipated an increase of $100m in research and development costs for 2020 as a result of remdesivir’s drug trials. Meanwhile, the company’s stock has gained 24.2% this year.

remdesivir financial impact

Remdisivir, a drug that was initially developed to treat ebola patients, has gained popularity after a clinical trial conducted by the US National Institutes of Health (NIH) showed that it led to significant improvements in patients who were facing severe respiratory issues related to the virus.

At the time, Fauci recently said the drug demonstrated “a clear-cut, significant, positive effect in diminishing the time to recovery”.

According to a report from the Journal of Virus Eradication, the cost of producing an entire treatment course of remdesivir should be around $9, while the final price for consumers is yet to be determined. Analysts’ estimate that the price of a 10-day course will be around $260.

The biotech firm has already committed to donating over 1.5 million vials of remdesivir while it expects to have over 140,000 treatment courses ready to be delivered by the end of May.

You can buy shares of Gilead Sciences and other biotech firms by using one of our preferred free stock trading apps or you can buy an ETF that tracks the biotech industry.

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Alejandro Arrieche

Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and have also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.