Remdesivir Financial Potential Forecast
* We assume that Remdesivir will become a front line treatment, given to all symptomatic people regardless of their severity of symptoms.
Putting this together, let's take a look at Gilead Sciences' Remdesivir financial potential forecast. We will assume that the company becomes a front-line treatment for COVID-19 and that the price paid for treatment is proportional to healthcare expenditures per capita. We will also assume that this is a one-time deal for shareholders i.e. that a vaccine is created in a year.
Healthcare Spending per Capita - Forbes
The above image shows healthcare spending per capita by country. We'll take the $1800 treatment number above for the U.S. and adjust proportionally. That means, for OECD, which has half the average healthcare expenditures of ~45% of the United States. That means that the OECD average expenditure for COVID-19 will be $810/person.
Additionally, let's look at India ($209/capita, so $36/COVID-19 treatment). China spends more than double that per capita, so we'll put it at ~$80/COVID-19 treatment. We'll also stick to estimates that COVID-19 will affect approximately half of the world's population, and we'll assume that 25% of asymptomatic people don't need treatment.
The total OECD population is 1.3 billion people. India's population is 1.35 billion people and China's population is 1.4 billion people. Putting all of this together means that these 4 billion people have the potential to generate a massive amount of COVID-19 revenue. In fact, using our 50% statistic, (37.5% with asymptomatic), that's the potential for more than $450 billion in revenue.
That's significant potential for shareholder returns and profits.
Additionally, even if the company sells Remdesivir at breakeven prices, or slightly lower prices, the company has significant potential. If it makes only $5 profit/pill with 50% of the population and 25% asymptomatic and our same numbers, that means the potential for $15 billion in profit. For a company with a $100 billion market capitalization, that's the potential for significant returns.
Even if the company doesn't make profits, there's significant potential. That's because the company becoming the face of COVID-19 treatment could mean significant potential from customers learning about the country's other drugs. Even if they don't, the company will get significant benefits from the manufacturing infrastructure selling drugs at cost will subsidize.
Either way, it's likely that Gilead Sciences makes billions from this.
The main risk that investors in Gilead Sciences should pay attention to in terms of its COVID-19 potential is investors pricing in too much growth and then an alternative treatment being found. Work is being done around the world to find potential treatments, and success in any of these fields would mean that investors unfairly bid up Gilead Sciences' share price, and it would drop back down.
However, currently, Gilead Sciences seems to have one of the best treatments.
Gilead Sciences' recent Remdesivir treatment news is exciting, and we take the time to analyze it in this article. We expect that this treatment has the potential to generate significant results for shareholders, even if the company is incredibly responsible about how much it charges, in one of the world's worst pandemics ever.
Compared to HIV and the flu, this treatment, which has the potential to be a new front of the line treatment, can save many lives. In the best scenario, the treatment has the potential to return several times the company's market cap, but even in the worst case, infrastructure will likely be subsidized for the company. Overall, the company is a quality investment.
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