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Indian Patent Regulators Pose Serious Downside Risks to Gilead Global Earnings

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Indian Patent Regulators Pose Serious Downside Risks to Gilead Global Earnings

 

 

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Pharmaceutical factory equipment mixing tank on production line.

Gilead Sciences (NASDAQ:GILD) is one hot biotech company. Thanks to its HIV and Hepatitis C  drug breakthroughs, the Foster City pharmaceutical company is poised to rack up impressive numbers in the short term. Buoyed by its Hepatitis C treatment Sovaldi, its 2014 revenues are estimated at $24.2 billion-roughly double the previous year’s figures. Gilead’s streak ran into a brick wall in India though.

According to India’s Controller General of Patents, Trademarks, and Designs, Gilead’s agreement with seven Indian generics companies are invalid. This paves the way for an unlimited number of Indian generics manufacturers to produce the generic version of Sovaldi, sofosbuvir. This is seriously bad news for Gilead because its deal with the seven Indian generics makers provides a workable brake on how badly generic pricing would cut into Sovaldi’s global pricing. A lot is riding on how Gilead can get around this patent debacle. Sovaldi treatment can cost up to $84,000 per patient in the USA. Despite its steep price tag, Sovaldi is in high demand-not just in the US where patients can presumably afford it, but the world over as well. This has led to strong political pressure on Gilead to ‘democratize’ its pricing to make sofosbuvir affordable to Third world patients suffering from Hepatitis C.

Indian pharmaceutical companies are world-renowned for their ability to make otherwise prohibitively expensive HIV drugs affordable to Third World patients. Given the Indian Patent Office’s decision, it appears Sovaldi is headed for the same fate. This move might close entire market regions to Gilead since it is probably not going to be able to effectively compete against basement level generics pricing. It wouldn’t be unreasonable to expect its global sales figures to stabilize and decline over the mid-term. As the US and other developed markets’ current demands for Hepatitis C treatments decline due to effective treatment, Gilead might not be able to expand elsewhere due to local generics pricing pressure. This all leads to reduced sales figures over the mid-term. Perhaps, Gilead Sciences is a victim of its own success?

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