GILD Gilead Sciences Inc

Mylan, Inc. (MYL) recently announced that its Indian subsidiary Matrix Laboratories has been granted future rights to produce and sell generic versions of three investigational HIV therapies of Gilead Sciences, Inc. (GILD), if and when approved. The agreement aims to expand access to HIV therapies in developing nations. The therapies include elvitegravir, an integrase inhibitor; cobicistat, an antiretroviral (ARV) boosting agent; and the "Quad," a once-daily combination pill of elvitegravir, cobicistat and Gilead’s another HIV combination medicine Truvada (Emtriva+Viread).

The rights are an extension of the non-exclusive license granted to Matrix to produce and sell active pharmaceutical ingredients and finished products, including generic versions of Viread and Truvada in 95 developing countries including India. The license has now been expanded to include 16 additional countries, the three investigational medicines and also the right to sell Viread for another indication, namely chronic hepatitis B.

One of the world’s largest manufacturers of HIV drugs, Gilead has similarly expanded original licensing agreements with three other Indian generic manufacturers (Hetero Drugs Ltd., Ranbaxy Laboratories Ltd. and Strides Arcolab Ltd.) to provide easy access to generic HIV therapies to patients in the developing world. In a similar vein, in June 2011, Mylan entered into an agreement with Bristol Myers Squibb (BMY) to expand access to generic versions of Bristol Myers’ drugs Reyataz, Zerit and Videx in Sub-Saharan Africa and India. Such endeavors help bring generics of HIV drugs easily to victims in the less privileged parts of the world.

Our Recommendation

We currently have a Neutral recommendation on Mylan. The shares however carry a Zacks #2 Rank (short-term Buy rating). Mylan is one of the leading players in the US generics market. The company holds immense potential as many blockbuster drugs are slated to lose patent exclusivity in the forthcoming period. We are encouraged by Mylan’s robust generic pipeline. However, competition in the generic segment is strong with players like Teva Pharmaceuticals (TEVA), Watson Pharma (WPI), Par Pharmaceuticals (PRX) and Sandoz - the generics arm of  Novartis (NVS) in the field. We also remain concerned about the lack of growth in the European generics business. We intend to remain watchful until we get better visibility on top-line growth prospects in Europe.

We currently have a Neutral recommendation on Gilead. The stock carries a Zacks #3 Rank (short-term “Hold” recommendation). We are optimistic on the growth potential of Gilead’s HIV franchise drugs, Truvada and Atripla. However, we are concerned about patent challenges to its key HIV drugs. Hence, we maintain a Neutral recommendation till the current pipeline proves its worth compensating for lost revenues from patent lapses.

 
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