Promising, Uncontrolled Data From Gilead's Remdesivir
We're maintaining our $82 fair value estimate for the wide-moat firm while we await more data from the testing.
Gilead shares rose significantly on the morning of April 17 on more promising (but anecdotal) information on remdesivir's efficacy. This news comes on the heels of the April 10 publication of data in 53 compassionate use patients receiving remdesivir, which also lacked control data. While we remain optimistic about Gilead's potential efficacy (we build in a 70% probability of approval this year and 40% probability of stockpiling between 2021-23, with peak sales approaching $1.5 billion in 2021), it is difficult to interpret this new information without more data on the severity of illness in the patients discussed, and we're maintaining our $82 fair value estimate. For example, patients on ventilators die at a much higher rate than those only on oxygen support; in fact, data from the China CDC covering more than 40,000 confirmed cases of coronavirus indicated that almost half of the more than 2,000 "critical" patients (including those on ventilators) died, while none of the more than 6,000 patients with "severe" disease (shortness of breath and low oxygen levels) died.
Most importantly, without control data to give us an indication of how similar patients might do without remdesivir, we do not see rationale for adjusting our probabilities. That said, increasing these probabilities of approval to 100% would increase our fair value estimate by roughly $2 per share. We expect to see controlled datasets emerging in the near term; although the two China studies were terminated due to lack of enrollment (likely due to the dissipating outbreak in this region), the data in patients enrolled should be disclosed shortly (data was initially poised for April release, although no updated timelines have been disclosed). In addition, Gilead's study in moderate patients compares with standard of care, and the study run by National Institute of Allergy and Infectious Diseases (part of the National Institutes of Health) is placebo-controlled; both should have data in May.
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