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Gilead to Benefit from Tamiflu Orders
We highlight Gilead Sciences, Inc. (GILD - Analyst Report) and Roche Holding Ltd. (RHHBY).
On April 30, 2009, U.S. Health and Human Services (HHS) Secretary Kathleen Sebelius announced that the government would quickly look to re-stock the 12 million doses of Tamiflu released earlier in the week to combat the H1N1 (swine flu) virus.
Over the past few years the CDC (Centers for Disease Control) has kept a stockpile of about 50 million doses of the antiviral drug, Tamiflu (oseltamivir), on hand specifically to combat pandemic spreading of the flu virus. The policy came into effect on fears that the H5N1 (avian flu) virus was becoming a global pandemic in 2005.
Previously, stockpiling the drug was not possible because Tamiflu, manufactured by Roche Pharmaceuticals (RHHBY), had a shelf-life of only about 1 year. Plus, Roche had significant capacity constraints on the drug and was only able to produce around 5 million doses a year as recently as 2002.
However, Roche has since substantially increased its manufacturing capacity on Tamiflu. It is now able to produce over 400 million doses a year, and has expanded the shelf-life up to 5 to 7 years.
HHS will spend approximately $250 million for 13 million doses of Tamiflu to allow the U.S. to replenish its stockpiles. The U.S. will also ship approximately 400,000 doses to Mexico. Other countries around the world, along with the World Health Organization (WHO), are also expected to place orders for the drug to combat the rapidly spreading H1N1 influenza virus.
Roche pays a royalty of 20% on Tamiflu sales to the developer of the product, Gilead Sciences (GILD - Analyst Report). The $250 million order from the U.S. HHA alone is expected to provide $50 million to Gilead in the third quarter 2009.
Gilead has seen Tamiflu royalties vary significantly over the past few years -- at $415 million in 2007 on massive stockpiling in the U.S., Europe and Japan, but down to less than $200 million in 2008 on far less stockpiling and a relatively mild flu year.
However, with the outbreak of the H1N1 virus, we expect Gilead to see Tamiflu royalties back up over $300 million in 2009, and potentially approaching $300 million again in 2010 if the pandemic continues.
On April 30, 2009, U.S. Health and Human Services (HHS) Secretary Kathleen Sebelius announced that the government would quickly look to re-stock the 12 million doses of Tamiflu released earlier in the week to combat the H1N1 (swine flu) virus.
Over the past few years the CDC (Centers for Disease Control) has kept a stockpile of about 50 million doses of the antiviral drug, Tamiflu (oseltamivir), on hand specifically to combat pandemic spreading of the flu virus. The policy came into effect on fears that the H5N1 (avian flu) virus was becoming a global pandemic in 2005.
Previously, stockpiling the drug was not possible because Tamiflu, manufactured by Roche Pharmaceuticals (RHHBY), had a shelf-life of only about 1 year. Plus, Roche had significant capacity constraints on the drug and was only able to produce around 5 million doses a year as recently as 2002.
However, Roche has since substantially increased its manufacturing capacity on Tamiflu. It is now able to produce over 400 million doses a year, and has expanded the shelf-life up to 5 to 7 years.
HHS will spend approximately $250 million for 13 million doses of Tamiflu to allow the U.S. to replenish its stockpiles. The U.S. will also ship approximately 400,000 doses to Mexico. Other countries around the world, along with the World Health Organization (WHO), are also expected to place orders for the drug to combat the rapidly spreading H1N1 influenza virus.
Roche pays a royalty of 20% on Tamiflu sales to the developer of the product, Gilead Sciences (GILD - Analyst Report). The $250 million order from the U.S. HHA alone is expected to provide $50 million to Gilead in the third quarter 2009.
Gilead has seen Tamiflu royalties vary significantly over the past few years -- at $415 million in 2007 on massive stockpiling in the U.S., Europe and Japan, but down to less than $200 million in 2008 on far less stockpiling and a relatively mild flu year.
However, with the outbreak of the H1N1 virus, we expect Gilead to see Tamiflu royalties back up over $300 million in 2009, and potentially approaching $300 million again in 2010 if the pandemic continues.