Shares of Gilead Sciences (GILD - Analyst Report) gained 3.25% to close the trading session on Aug 15 at $99.45 per share following the favorable verdict by an arbitration panel in a patent infringement case with Roche (RHHBY - Analyst Report). The tussle was regarding Gilead’s blockbuster hepatitis C drug, Sovaldi (sofosbuvir).
The Story So Far
In 2004, Roche had inked a deal with Pharmasset on PSI-6130. Pharmasset had developed Sovaldi before it was acquired by Gilead in early 2012. Roche initiated the arbitration proceedings in Mar 2013 and claimed that due to the agreement with Pharmasset it enjoyed exclusive rights over sofosbuvir. Roche claimed that sofosbuvir was the prodrug of PSI-6130.
Gilead challenged Roche’s claims in Apr 2013. The recent decision from the arbitration panel was in favor of Gilead. The panel stated that since Roche was unsuccessful in establishing any of its claims, it was not entitled to any damages/ relief.
The favorable verdict on Sovaldi has removed a major overhang on Gilead’s shares. Sovaldi is now the primary revenue earner of this biopharmaceutical major. Sovaldi has performed exceptionally well since its U.S. launch in Dec 2014. The drug has generated sales of almost $5.8 billion in the first six months of 2014 and should continue performing well. Gilead has been priced at $84,000 for a 12-week treatment period.
NICE News for Gilead
Gilead received further encouraging news on Sovaldi when U.K.'s cost-effectiveness watchdog – NICE – recommended the use of the drug for treating patients suffering from chronic hepatitis C. The pricing is more than $58,000 for a 12-week treatment period. We note that Sovaldi was approved in the EU in Jan 2014. The positive recommendation from NICE follows the submission of additional information by Gilead on Sovaldi’s cost effectiveness. The additional information on Sovaldi was requested by NICE in June this year.
Gilead carries a Zacks Rank #1 (Strong Buy). Stocks such as Actelion (ALIOF - Snapshot Report) and Illumina (ILMN - Analyst Report) are equally well ranked in the health care space.