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Buy Calls on Gilead Sciences
Now that the world has its first preventative drug for HIV, Truvada, is it time to buy calls on Gilead Sciences - GILD, the folks who own the patent? Or is it too late to buy calls on Gilead Sciences because the market already reacted to the news of FDA approval? Remember that both fundamentals and market sentiment drive stock prices. We have yet to see if this $11,000 a year drug will sell widely enough to make Gilead Sciences a profit. And we have yet to see how the market will react once this drug is in continual use. Gilead Sciences has been listed on NASDAQ for twenty years and for the first six it was a penny stock.
The company specializes in the development of anti-viral treatments and currently has fourteen products on the market. Its focus has been on HIV, hepatitis B, and influenza. The stock’s pre-recession high was around $56 and it regained the $50 range, coming up from $35 a share, early in 2012. Gilead Sciences only gapped up fifty cents on the news of FDA approval for the drug. Concerns are that it is so expensive that those most at risk will not be able to afford it and neither will government programs aimed at treating HIV in the same populations. Before deciding to jump in and buy calls on Gilead Sciences one may do well to consider how to trade stock options on this Gilead Sciences over time.
When Will We Know How Profitable Truvada Is for Gilead Sciences?
How many people will use Truvada and how much money will Gilead Sciences make per patient? It turns out that Truvada has already been on the market for eight years as a treatment for HIV. It was the finding that the drug seemed to prevent infection that lead to trials and FDA approval for this use. Studies indicate that partners of HIV infected persons can reduce their risk of catching HIV by seventy-five percent by taking Truvada. The drug is not perfect but is the first med proven to reduce the chance of getting HIV in exposed people. There are fifty thousand new cases of HIV in the USA every year. What is it worth reduce this number by three fourths or even half? The average yearly cost of treating a person with HIV in the USA is around $20,000. It appears that for half this amount one can cut the risk of catching the disease significantly.
However, if one chooses to treat a million or so gay men in hopes of reducing the number who get HIV the cost would run around $11 Billion for Truvada in order to prevent 25,000 cases a year, which would cost $500 million more each year to treat. If you believe that health insurance companies and various government agencies will pay for Truvada you probably want to buy calls on Gilead Sciences. If you believe that HMOs will act as they always do and put barriers in the way of those who want the drug and that a cash strapped America will not have the wherewithal to pay for the drug you will probably not buy calls on Gilead Sciences.