This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

The Numbers Backing Gilead's Best and Fastest Drug Launch in History

Stocks in this article: GILDVRTXCELGENTAJNJABBVMRKBIIBAMGN

Now that Gilead Sciences  (GILD) has won U.S. approval for Sovaldi, investors will shift quickly to focus on tracking the hepatitis C drug's commercial launch.

Gilead is expected to sell a lot of Sovaldi -- and fast. Sell-side analysts, on average, are forecasting U.S. sales of $2.2 billion in 2014, ramping to $6.1 billion in 2015 and $8.5 billion in 2016.

Institutional investors, on average, believe first-year Sovaldi sales will total $2.6 billion, according to a recent survey conducted by ISI Group analyst Mark Schoenebaum.

How does Gilead get to $2 billion-plus in Sovaldi sales in a single year?

The company hasn't provided any sales guidance for the hepatitis C pill yet but here's the roadmap predicted by sell-side analysts:

The company will use the first quarter of 2014 as warm up, delivering "just" $194 million in Sovaldi revenue. The accelerator hits the floor in the second quarter 2014 with sales jumping to $419 million. Third quarter: $611 million. Fourth quarter: $869 million.

[These quarter estimates adds up to $2.1 billion, which is the "old" analyst consensus from two weeks ago. Numbers are already going up.]

Don't worry if you're having a hard time fathoming how a single drug can deliver $2 billion-plus in its first year on the market. It's never been done before.

Vertex Pharmaceuticals'  (VRTX) hepatitis C drug Incivek is the current "Fastest Drug Launch Ever" champion.

Approved in May 2011, here's what Incivek sales looked like its first four quarters: $75 million, $420 million, $457 million, $357 million. Total: $1.3 billion.

So, the first year of Gilead's Sovaldi launch is supposed look like Incivek times two.

Amazing.

I'm only discussing the average consensus expectations here. If you really want to blow your mind, consider the uber-bull thesis of Deutsche Bank's Robyn Karnauskas. She predicts 2014 U.S. Sovaldi sales of $4.5 billion, peaking at $17.3 billion in 2017.

In other words, Karnauskas believes Sovaldi will become the biggest selling drug in history, easily surpassing the $13 billion a year brought in by Pfizer's  (PFE) cholesterol drug Lipitor in its heyday.

Karnauskas is to Gilead and Sovaldi what former UBS analyst Meirav Chovav was to Genentech and its cancer drug Avastin. Those with some biotech investing history will remember back to 2003 when Chovav wowed investors with a report predicting Avastin sales of $10 billion annually. Chovav over-reached so we'll see if Karnauskas can do better.

Gilead priced Sovaldi at $1,000 per pill, so a 12-week regimen (the most common treatment duration for hepatitis C patients) will cost $84,000.

Let's do some cocktail-napkin math:

To deliver $2 billion in 2014 sales, Gilead would have to treat 23,800 hepatitis C patients, based on the $84,000 Sovaldi price tag. [Sovaldi will be discounted, perhaps by 20% or more, so the actual number of patients will be higher, but this is just rough math.]

Approximately 3-4 million Americans suffer from hepatitis C, so treating 24,000 patients isn't all that much.

At the peak, Vertex and Merck  (MRK) (which sells the hepatitis C drug Victrelis) were treating 7,000 genotype 1 patients with per month combined, says Deutsche Bank's Karnauskas. She adjusts upwards by 25% to account for Sovaldi's approval to treat the hepatitis C genotypes, so 8,750 patients per month.

This implies Gilead could treat 100,000 hepatitis C patients in a year just by matching the peak commercial performance of Vertex and Merck i.e. not doing any better and not taking into account Solvadi's superior efficacy and convenience. Karnauskas is "conservatively" estimating Gilead treats 60,000 hepatitis C patients in 2014.

Other factors to consider: Will insurers accept or balk at paying $84,000 for Sovaldi? Will they demand patients try less expensive therapies first, like Johnson & Johnson (JNJ) and Medivir's  newly approved Olysio, for example?

Gilead will also face competition from an equally effective combination regimen from Abbvie  (ABBV) and Enanta Pharma (ENTA).

Interesting times ahead!

Before I let you go, I want to end with two stock charts which I find really interesting because they show in stark terms just how much Gilead (and its shareholders) have gained from the November 2011 acquisition of Pharmasset. This is the deal that delivered Sovaldi into Gilead's hands.

You may not remember but before Gilead bought Pharmasset for $11 billion, investors were not happy with the company at all. Gilead's core HIV drug franchise was seen as stagnating and in jeopardy of declining once patents expired in 2017 or so. Gilead's efforts to diversify beyond HIV were not very successful. Among the big-cap biotechs, Gilead was very much unloved.

This is a two-year chart that ends in November 2011, which is when Gilead bought Pharmasset. As you can see, Gilead was the worst performer among the big-cap bioechs. Celgene (CELG), Amgen (AMGN) and Biogen Idec (BIIB) all out-performed Gilead.

GILD Chart
GILD data by YCharts

 And then Pharmasset transformed Gilead into a hepatitis C powerhouse.This chart starts in December 2011, so right after the Pharmasset acquisition, and continues to the present:

GILD Chart
GILD data by YCharts

 A complete turnaround for Gilead.

Pretty cool. 

-- Reported by Adam Feuerstein in Boston.

Follow Adam Feuerstein on Twitter.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,828.24 +0.49 0.00%
S&P 500 2,067.56 -5.27 -0.25%
NASDAQ 4,791.63 +4.3130 0.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs