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Gilead to Pay Merck $2.5B in HCV Patent Dispute, Stock Falls
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Gilead Sciences Inc. (GILD - Free Report) suffered a major setback after a federal jury in the U.S. District Court, District of Delaware ordered the company to pay $2.54 billion in royalties to Merck & Co., Inc. (MRK - Free Report) for a patent infringement lawsuit related to its sofosbuvir-based medicines for the treatment of hepatitis C virus (HCV), including its blockbuster drugs, Sovaldi and Harvoni.
After an almost two-week long trial, the jury came to a decision that Gilead owed 10% royalties on total sales of a staggering $25.4 billion for the two drugs. While Gilead’s shares lost 2.1% in afterhours trading on Dec 15, Merck’s stock gained 1.3%.
Gilead’s year-to-date share price movement shows that the stock has outperformed the Zacks classified Medical – Biomedical and Genetics industry, albeit marginally. The stock has lost 25.3% so far this year, compared to the industry's 25.5% decline. Merck too outdid the Zacks classified Large Cap Pharmaceuticals industry’s performance. It has surged 18.1% so far this year, while the industry lost 6%.
Coming back to the latest news, the decision is reportedly being touted as the largest patent infringement verdict in the history of the U.S. Making matters worse for Gilead, the patent infringement was found to be willful, implying that the judge could increase the damage award by as much as three times the amount set by the jury.
While reports say that Gilead is planning to aggressively appeal to the ruling, the company has asserted that the verdict will not be able to affect sofosbuvir and sofosbuvir-containing drugs sold in the U.S.
We remind investors that Idenix Pharmaceuticals, Inc., which was acquired by Merck in Aug 2014, filed a patent infringement lawsuit against Gilead in Dec 2013, bringing charges against the latter’s method of treating HCV using Sovaldi. In Jan 2012, Gilead had acquired Pharmasset, Inc. in a transaction that added sofosbuvir, a nucleotide analog that acts to inhibit the replication of HCV, to its portfolio.
Gilead gained U.S. approval for sofosbuvir, marketed as Sovaldi in Dec 2013, which was followed by the FDA nod for Harvoni, a combination of sofosbuvir and ledipasvir, in Oct 2014. The lawsuit was meant to determine the first to invent the claimed methods of treating HCV. According to Gilead, Idenix never satisfactorily described what it claimed to have invented and the patent didn’t cover a new idea either.
We note that this was the second time that Gilead and Merck were involved in a patent infringement lawsuit. The first trial was initially resolved in Mar 2016, after a jury in the U.S. District Court, Northern District of California ordered Gilead to pay $200 million to Merck. However, in June, the court ruled in Gilead’s favor and overturned the verdict.
Gilead was also involved in several patent disputes with AbbVie Inc. (ABBV - Free Report) related to its HCV treatment. The companies, however, resolved their disputes and entered into a settlement agreement in Aug 2016.
The latest development has dealt a major blow to Gilead’s stock, especially at a time when the company’s HCV franchise is already reeling under competitive and pricing pressure from Merck’s Zepatier and AbbVie’s Viekira Pak.
Both Gilead and Merck carry a Zacks Rank #3 (Hold).
Vanda’s loss estimates narrowed from 62 cents to 52 cents for 2016, while its earnings estimates for 2017 increased from 13 cents to 22 cents over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 56.65%. Its share price has surged almost 71% year to date.
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Gilead to Pay Merck $2.5B in HCV Patent Dispute, Stock Falls
Gilead Sciences Inc. (GILD - Free Report) suffered a major setback after a federal jury in the U.S. District Court, District of Delaware ordered the company to pay $2.54 billion in royalties to Merck & Co., Inc. (MRK - Free Report) for a patent infringement lawsuit related to its sofosbuvir-based medicines for the treatment of hepatitis C virus (HCV), including its blockbuster drugs, Sovaldi and Harvoni.
After an almost two-week long trial, the jury came to a decision that Gilead owed 10% royalties on total sales of a staggering $25.4 billion for the two drugs. While Gilead’s shares lost 2.1% in afterhours trading on Dec 15, Merck’s stock gained 1.3%.
Gilead’s year-to-date share price movement shows that the stock has outperformed the Zacks classified Medical – Biomedical and Genetics industry, albeit marginally. The stock has lost 25.3% so far this year, compared to the industry's 25.5% decline. Merck too outdid the Zacks classified Large Cap Pharmaceuticals industry’s performance. It has surged 18.1% so far this year, while the industry lost 6%.
Coming back to the latest news, the decision is reportedly being touted as the largest patent infringement verdict in the history of the U.S. Making matters worse for Gilead, the patent infringement was found to be willful, implying that the judge could increase the damage award by as much as three times the amount set by the jury.
While reports say that Gilead is planning to aggressively appeal to the ruling, the company has asserted that the verdict will not be able to affect sofosbuvir and sofosbuvir-containing drugs sold in the U.S.
We remind investors that Idenix Pharmaceuticals, Inc., which was acquired by Merck in Aug 2014, filed a patent infringement lawsuit against Gilead in Dec 2013, bringing charges against the latter’s method of treating HCV using Sovaldi. In Jan 2012, Gilead had acquired Pharmasset, Inc. in a transaction that added sofosbuvir, a nucleotide analog that acts to inhibit the replication of HCV, to its portfolio.
Gilead gained U.S. approval for sofosbuvir, marketed as Sovaldi in Dec 2013, which was followed by the FDA nod for Harvoni, a combination of sofosbuvir and ledipasvir, in Oct 2014. The lawsuit was meant to determine the first to invent the claimed methods of treating HCV. According to Gilead, Idenix never satisfactorily described what it claimed to have invented and the patent didn’t cover a new idea either.
We note that this was the second time that Gilead and Merck were involved in a patent infringement lawsuit. The first trial was initially resolved in Mar 2016, after a jury in the U.S. District Court, Northern District of California ordered Gilead to pay $200 million to Merck. However, in June, the court ruled in Gilead’s favor and overturned the verdict.
Gilead was also involved in several patent disputes with AbbVie Inc. (ABBV - Free Report) related to its HCV treatment. The companies, however, resolved their disputes and entered into a settlement agreement in Aug 2016.
The latest development has dealt a major blow to Gilead’s stock, especially at a time when the company’s HCV franchise is already reeling under competitive and pricing pressure from Merck’s Zepatier and AbbVie’s Viekira Pak.
Both Gilead and Merck carry a Zacks Rank #3 (Hold).
A Key Pick
Vanda Pharmaceuticals, Inc. (VNDA - Free Report) is a better-ranked stock in the health care sector, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Vanda’s loss estimates narrowed from 62 cents to 52 cents for 2016, while its earnings estimates for 2017 increased from 13 cents to 22 cents over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 56.65%. Its share price has surged almost 71% year to date.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>