Gilead Sciences is on track to make a profit on its Covid-19 therapeutic remdesivir this year, according to a note out just before the long weekend from analyst Robyn Karnauskas at SunTrust Robinson Humphrey.
Karnauskas, who rates Gilead stock (ticker: GILD) at Hold, maintained her price target of $73. Shares are up 1.2% to $77.26 in Monday morning trading, and have surged 17.5% so far this year, topping the 2% slide in the S&P 500 Index, a broad measure of the market.
The note came after the U.S. Department of Health and Human Services announced early last week that it had arranged for American hospitals to be able to purchase 500,000 treatment courses of remdeivir through the end of September, constituting most of the global supply. Karnauskas wrote that those purchases would mean $1.2 billion in remdesivir sales in the third quarter, and that sales of the drug in the fourth quarter could reach $1.8 billion, for total remdesivir sales of $2.9 billion in 2020.
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As for how much the company is spending on remdesivir in the second half of the year, Karnauskas wrote that thinks the company will spend $100 million on ongoing remdesivir studies. She wrote that the cost to manufacture the drugs will be around $376 million, and calculates earnings before interest and taxes on remdesivir of $698 million in the third quarter, and $1.1 billion in the fourth quarter.
The stock trades at 11.6 times expected earnings over the next 12 months, according to FactSet, above its five-year average of 7.3 times earnings. Of the 30 analysts who follow the company tracked by FactSet, 16 rate it a Hold, while 11 rate it Overweight or Buy.
Last week, Gilead set a price of $2,340 for a course of remdesivir, or $3,120 for U.S. insurers. Analysts have disagreed about the impact of that pricing. Some critics have called the price point too high, noting that federal government grants supported the drug’s development. But the company has said that the price is lower than the amount the drug will save in hospitalization costs, and that the pricing will give patients access to the drug.
