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Finding Your Fortune in Foster City
The trials and tribulations of a Wall Street darling.
FOSTER CITY, CALIFORNIA (Rixstep) — You'd be forgiven for thinking you're one of the boys and rooting them on after reading this.
That's a gloss piece on Gilead Sciences from Bloomberg. You learn about the humble origins of this California company, starting with an initial investment of only a million or two. You'll learn how they then magically blossomed into the biggest antiviral manufacturer in the world.
There was a bit of a blip on the radar earlier this year, but thankfully that's over now and things are back to normal again. (Knock on bark.)
Did you know that Donald Rumsfeld ran the show at Gilead? Until he answered the call to join the government of Dubya Bush and hunt down all those 'unknown unknowns'?
Yes. Rumsfeld was recruited to the Gilead board of directors back in 1988. Another White House celebrity, George Shultz, the man who promised Russia that NATO would not move 'one inch' further east, was also on board. Gilead tried to get Warren Buffett on board too, but he said no. Rummy became Chairman of the Board in January 1997.
Over the years, Gilead has come under intense criticism for price gouging. Their patented drug sofosbuvir, for example, launched at a price of $1,000 per pill. Sofosbuvir was part of an 84-day protocol, so the full price for use was a facile $84,000.
Gilead's also been mean to the competition at times. They're known for entering voluntary licensing agreements (VLs) with companies from developing countries which limit operations to less lucrative markets.
They've also been criticised for creating harsh restrictions within countries where they have been denied rights, or are engaged in VLs.
And then we come to their wonder drug remdesivir. Except it's not a wonder at all. Early studies found it promising for use against several RNA viruses including SARS and MERS, but it never got approved. It might have been approved for the fight against Ebola, but Ebola petered out. And it became difficult to recruit guinea pigs.
Remdesivir was originally developed to treat hepatitis C. It was tested against Ebola, but it didn't work. And remdesivir has some unpleasant side-effects. Respiratory failure, organ impairment, low albumin, low potassium, low red blood cell count, low platelet count, yellow skin discolouring...
But the US Patent and Trademark Office (USPTO) granted Gilead two patents on remdesivir in April 2019, one for filoviruses and one for arenaviruses and - yep - coronaviruses.
The first case of COVID fatality was on New Year's Eve 2019. By 21 January 2020, Zhengli-Shi's institute applied for a 'use patent' for remdesivir.
Yes, in a trial run already in February - March 2020, remdesivir was found ineffective in fighting COVID-19, and it actually caused adverse effects that forced the run to be aborted.
Still and all, bless free enterprise! On 1 May 2020, the US Food and Drug Administration (FDA), the same agency that wants to stop the Henry Ford Hospitals from using another drug, granted Gilead an 'Emergency Use Authorisation' for remdesivir in the fight against the one pestilence it's so far been shown to fail at.
Gilead now has an agreement with five generic pharma companies for remdesivir manufacture. And, on 15 June, the FDA helped out again by updating their 'fact sheet' for that 'Emergency Use' - they started pointing out that the possible antiviral effects of remdesivir may be negatively impacted by simultaneous use of - hydroxychloroquine (HCQ) or its ancestor chloroquine, a Bayer 'invention' - a discovery by researcher Hans Andersag - from 1934. The fact sheet update noted the following specifically.
'The agency is not aware of instances of this reduced activity occurring in the clinical setting but is continuing to evaluate all data related to remdesivir.'
In other words, the backing evidence is less than anecdotal. There may have been anecdotes about possible anecdotes, but those are unknown unknowns, so even such an assertion would be iffy.
But we march on.
On 25 June, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) recommended granting a conditional marketing authorisation for remdesivir using the new brand name Veklury. CHMP's department secretary Alex Azar stated:
'President Trump has struck an amazing deal to ensure Americans access to the first authorised therapeutic for COVID-19.'
On 3 July, the European Union granted remdesivir a conditional marketing authorisation for use against COVID-19.
Also in July, remdesivir was provisionally approved for use in Australia.
Already back in February 2020, when little of COVID was known, save that a pandemic was underway, Gilead flew their entire stock of remdesivir, 100 kilograms left over from their failed Ebola research, to their filling plant in La Verne, California.
Back in 2018, two years earlier, there'd been another Ebola outbreak, this time in the Congo, and Gilead had another chance to redeem their wonder drug - but, alas, it didn't work. Again.
Manufacture of remdesivir is extremely time-consuming and highly dangerous (but not that expensive - only about $9 a bottle). Market analysts and stockholders suggested a starting price of $5000. Gilead's current CEO said that it's simply too soon to talk about price, but Wall Street disagrees.
'What is special about Covid?' Geoffrey Porges, an analyst at investment bank SVB Leerink LLC, asked Gilead CEO Daniel O'Day on an 30 April earnings call.
'Should we assume the returns are going to be similar to the returns you have generated in other parts of the business?'
Porges later explained that he views a pandemic as exactly the time a drug breakthrough should pay off big.
'The 50th medicine for blood pressure we are allowing them to make a profit on, but protecting the world from a pandemic - you can't make a profit on that? It is crazy. It should be the opposite.'
Gilead later announced a price of approximately $3500. For a vial that costs them $9. And, for that price, remdesivir can generate a billion or more in annual sales, already with use for a paltry few hundred thousand. Just imagine if it spreads worldwide into the millions.
Unsurprisingly, Gilead stock's been up 22% on the year. Save for one small blip when news broke of the efficacy of an out-of-patent drug known as hydroxychloroquine (HCQ) which is already on the WHO list of the 100 most essential drugs and, as of an extensive 2017 study by the WHO, one of the world's safest as well, surpassing even generic aspirin.
The Wikipedia article on HCQ is now protected, at a level known as 'extended confirmed protection'.
'Extended confirmed protection, also known as 30/500 protection, only allows edits by editors with the extended confirmed user access level, granted automatically to registered users with at least 30 days tenure and 500 edits.'
HCQ was approved for medical use in the US already in 1955. In 2017, it was the 128th most commonly prescribed medication in the US, with more than five million prescriptions.
In contrast to remdesivir, the cost of HCQ - per entire month of use - is $25, not $9 per vial. This cost is even lower in developing countries: $4.65.
News of the patent-free (fortune-free) HCQ hit the stock market hard. Gilead's fortunes plummeted - they lost $21 billion in market cap.
By the time Donald Trump mentioned HCQ, after being approached by Rudy Giuliani who'd been approached by New York physician Vladimir 'Zev' Zelenko, a war had broken out. Just as quickly as Gilead had been given rubber stamps for use of a drug that had done nothing but fail, another drug, shown to actually work, was being thwarted everywhere. Wikipedia's claim that there were shortages in supply for HCQ is not cited. The US and countries in Europe had stockpiles of tens of millions of doses. India, one of the big suppliers, has been ramping up. The drug is cheap and cheap to manufacture. But HCQ had to be taken out. There were 21 billion justifications.
On 19 July, Forbes published their piece the rise and imminent fall of HCQ, written by their food & drink editor Alex Ledsom. Key to this dismissal of HCQ - and the vindication of the Gilead market cap - was a, to say the least, strange study published in panic at The Lancet and the New England Journal of Medicine. It's not possible that anyone at either of those two egregious institutions even took a second glance at the study. The data was downright ridiculous, preposterous. But, as Richard Horton has pointed out, there's a lot of pressure brought to bear on medical publications, and over half of the studies published can turn out to be pure hooey.
As in this case. Where the medical staff of the mythical 'Surgisphere' corporation, purportedly headquartered in a residential neighbourhood in Illinois, included a porn actress taken from a talent agency pool. Once professionals began their digging into the study and its background, Surgisphere disappeared from the earth, their web presence completely erased, forcing Horton at The Lancet to issue a retraction a fortnight later. But the damage had been done. Quick as you can't believe, use of and research in HCQ was stopped in several European countries, resulting in fatalities in care facilities. Of this, the Ledsom piece in Forbes says only:
'The Lancet study was retracted because of an issue with third party data confidentiality.'
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