Gilead Sciences (NASDAQ:GILD) spent 125 million on a priority review voucher that it won’t be able to use for the next twelve months. Gilead Sciences (NASDAQ:GILD) bagged 6.2 billion dollars towards the end of third quarter but now out of that amount, 125 million has been spent on a voucher that’s worthless to it for one whole year and not a day less.
This voucher is awarded to companies only when they’ve received approval from the Food and Drug administration, for the drugs that treat neglected tropical diseases. It also gives the owner the luxury to reduce the time span of a standard review from 12 months, turning it into a priority review of 8 months. The voucher can be sold to other companies too, or used for other drugs that have gotten approval. But that doesn’t change the fact that the voucher can only be used once the company gives a 365 day warning to FDA that it’ll be using the voucher in the future for market application.
Other pharma companies paid way less for the voucher only months ago; some bought it at 67.6 million dollars while BioMarin (NASDAQ:BMRN) bought the voucher for pediatric diseases, which require only 90 days warning that is more convenient than a whole year. Gilead Sciences (NASDAQ:GILD) has stepped into a puddle and now the only way to scrape off the mud will be to sell the voucher to some other company.
A silver lining in the sky for Gilead Sciences (NASDAQ:GILD) could be that legislation being processed in Congress which will review the time span needed for the voucher to be made applicable. It’s being reviewed and reports are that the time might be reduced to 90 days.
The voucher provides various incentives such as the company gets revenue from sales four months earlier, additional four month of sales under patent and the drug goes to the market earlier meaning early sales and providing competition.
Even if Gilead Sciences (NASDAQ:GILD) gets revenue four months early, it won’t turn out to be that significant. The exceptional case would be if the drug turns out to be a grand hit in the market, only then Gilead Sciences (NASDAQ:GILD) would be happy with the early revenue. As far as extra four months on patent life is concerned, that is valuable if the company’s peak sales are high. The other incentives aren’t that much significant but in rare cases.
Gilead Sciences (NASDAQ:GILD) has gotten itself in a tight spot. It’s up to the company whether it’ll bother with the whole 12 months waiting process or sell away the voucher. Gilead Sciences (NASDAQ:GILD) doesn’t really have a choice here; also it’s hard if it can get any buyers for the voucher because who would want to settle with the whole hassle of the 12 month wait. Or Gilead Sciences (NASDAQ:GILD) can just pray that the legislation is passed and the time span for the waiting is reduced to 90 days. How the investment will turn out is yet to be seen.