Since the disease was identified in 1981, AIDS has claimed the lives of 25 million people. The latest? An all-in-one daily pill that's changing the rules of world trade.
By 1996 AIDS treatment was limited to "drug cocktails", a daily regime of about 35 pills. HIV sufferers found consuming so many pills both onerous and embarrassing. Side effects included severe nausea to the extent that the anti-HIV cocktails were impossible to take long-term. Patients often skipped doses, which enabled the virus to recover and develop resistance to treatment.
Today, thanks to scientific progress, we can no longer point to multi-drug cocktails as the reason for inaccessible AIDS treatment.
In August 2004, Gilead Sciences (GILD on Nasdaq) developed its concentrated drug Truvada, a once-daily pill that when taken with Bristol-Myers' Sustiva fully replaces the 35-pill drug cocktail. Just two pills per day encourages more patients to comply with their daily regime. In turn, regular drug dosages lengthens AIDS patients' lifespans.
Then in July 2006 the U.S. Food and Drug Administration approved a single, one-a-day pill for HIV-positive patients. The pill called Atripla is a potent combination of Truvada and Sustiva, can be taken before or after meals, and has few side effects. The wholesale price of a 30-day supply of Atripla is US$1,200.
And now the bad news.
Nearly 40 million people worldwide now suffer from HIV/AIDS. An estimated 25 million HIV-infected people live in Africa, the world's poorest continent.
Patients in poor countries aren't getting the life-saving drugs they need because of high drug prices and trade barriers blocking distribution. In Africa, up to 85% of patients can't get the life-sustaining treatment they need.
And The Winners Are...
With some US$2 billion in cash reserves, Gilead is able to subsidize a different business model for poor countries. For example, Gilead sells a daily dose of Truvada to African countries for 87 cents, contrasted with US$24.51 in America.
The firm has also established the Gilead Access Program, which supplies AIDS medication at no-profit prices to 97 poor countries including all of Africa and 15 United Nations designated "least developed nations."
And to make its best-selling AIDS treatment available to more people, Gilead is licensing its manufacturing secrets to local generic drug makers in the world's poorest countries. Generic versions of Gilead products are expected to sell at lower prices. As reported by Bloomberg, Gilead is negotiating with 10 Indian drug makers who won't be allowed to sell the medicines outside of designated poor countries. Drugs sold in developing nations will look different than Gilead's brands, thus discouraging copycat sales in wealthier nations.
Gilead explains that its new business model is based on an initiative spearheaded by the Clinton foundation in 2002. By selectively licensing its patents and helping Indian companies to make generic AIDS drugs, Gilead hopes to drive down prices for anti-HIV therapies in developing nations. The firm plans to capture more market share in developing nations by offering the world's leading AIDS drugs at the most competitive prices. Patients who live longer will consume more of Gilead's licensed generic drugs over their expanded lifespans.
Gilead Science's current stock price of $63 is near the upper range of its 52-week target of $72, so there are risks. For example, if an AIDS vaccine is discovered, Gilead's drug treatment sales for would obviously slow. However, should Gilead discover the AIDS vaccine the Delaware-based company's overall revenues will multiply.
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