The government will distribute Gilead’s Remdesivir. This could be bad news for investors
The world can rejoice a little over Remdesivir, a COVID-19 treatment of Gilead Sciences (NASDAQ: GILD) that the United States Food and Drug Administration (FDA) has cleared for emergency use in the treatment of acute cases of the novel coronavirus. The company initially produced the drug as a potential tool against Ebola in 2014, and proven – if preliminary – results have shown that Remdesivir may increase the survival rate of people diagnosed with COVID-19.
The FDA has said that a clinical trial has demonstrated the ability of Remdesivir to shorten recovery time in patients treated with the drug by intravenous administration. In its emergency use authorization, the agency mandated that the federal government have the final say over how Remdesivir is distributed.
Disease experts worried about drug distribution
The Infectious Diseases Society of America and the HIV Medicine Association sent an open letter to Vice President Michael Pence and the Federal COVID-19 Task Force asking them to describe the details of how they plan to distribute Remdesivir and how they expect to remain ethical and transparent. .
The letter calls on the Trump administration to ensure that healthcare facilities in communities already disproportionately affected by the coronavirus, including communities of color, have equal access to Remdesivir. He also asks the administration to publish the data so that hospitals can use them. Basically, these infectious disease doctors want direction on how the drug will travel across the country. Let’s take a look at some of the potential benefits of the mandate.
Meat for drugs: all federal control
President Donald Trump recently issued an executive order forcing meat-packing facilities to remain open during the remainder of the pandemic and the various related states of emergency. Trump issued this order through the Defense Production Act, more or less, after lobbying from producers, including Tyson Foods (NYSE: TSN).
Tyson is under public scrutiny over its treatment of workers and its ability to meet national demand for pork, beef and poultry; Analysts have warned that the use of the Defense Production Act, while providing short-term relief to companies like Tyson experiencing large declines in sales, could affect future trading.
Tyson’s fiscal second quarter profit report shows overall profits slump to a 9% loss, among other disappointing figures. And even with the federal government’s focus on keeping meat packaging afloat, Tyson still predicts national shortages and more uncertainty going forward.
The moral of the story is that federal regulatory guidelines and oversight of supply and production chains can make matters worse for companies, their employees, and their investors. Gilead’s supply chain intervention may well work out as it did with Tyson, that is, it will not guarantee delivery of products to market, let alone strengthen the production at accelerated rates.
Benefits and controversy taken into account, Gilead remains a buy
Remdesivir isn’t the only thing Gilead has going on. The company is fighting with the federal government over patents related to its popular anti-HIV treatment Truvada, and analysts are also concerned about the price of Remdesivir and its international availability. Price concerns stem from a 2013 controversy over Gilead’s Sovaldi, a life-saving drug touted as a cure for hepatitis C; critics said the company’s price of $ 1,000 per tablet was too high. Fortunately for Gilead, the Japanese Ministry of Health has just announced that Remdesivir will be used for severe cases of COVID-19 in that country, showing at least some international interest in the drug’s potential. National distribution and recent earnings reports, however, still paint a somewhat mixed picture, with controversy and potential long-term gains.
Gilead released its first quarter results a few days ago, and shares fell 5% shortly thereafter as management failed to respond to market concerns about the distribution of Remdesivir and its expected business model. An Axios report noted that the Trump administration lacks consistency in the distribution of Remdesivir, citing anonymous sources who claim the process has not been fair and the drug has not reached some of the centers. highest priority medical professionals who need it.
Gilead Sciences reportedly donated hundreds of thousands of doses of Remdesivir to the federal government after emergency use clearance from the FDA, which required the US Department of Health and Human Services to coordinate with the agency Federal Emergency Management Authority to allocate and distribute the drug. An administration official said about 5% of those doses – around 32,000 – were sent to the wrong counties in states such as New York, New Jersey, Virginia and Rhode Island due to issues with the model. distribution. The resulting uncertainty could hamper Gilead’s overall efforts to deliver the drug to those who need it most.
While there is reason to be concerned about federal control of Remdesivir in the short term, Gilead is still a buy-in when you consider its long-term income potential. With no official end date for the pandemic on the horizon and the COVID-19 virus set to become a seasonal illness like influenza, sales of Remdesivir could skyrocket, with the potential to generate over $ 750 million a year next and $ 1.1 billion in 2022. Right now, one of the most important things for health investors to watch out for is the federal coronavirus task force’s level of transparency regarding treatment with Remdesivir. If things look good on that front, this could be a great opportunity to jump on board.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.