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Goldman Sachs Asks – “Is Curing Patients A Sustainable Business Model?”

Well, if you believe Goldman Sachs is conducting God’s work — you should seriously think again.

In an April 10 report published exclusively for its premium clients, Goldman addressed a controversial subject for biotech companies, particularly those encompassing “gene therapy” (also called human gene transfer) treatment: medical breakthroughs regarding cures could be dangerous for a biotech company’s bottom line.

“Is curing patients a sustainable business model?,” a Goldman analyst asked in an April report titled “The Genome Revolution,” which CNBC first reported.

“The potential to deliver ‘one shot cures’ is one of the most attractive aspects of gene therapy, genetically-engineered cell therapy and gene editing. However, such treatments offer a very different outlook with regard to recurring revenue versus chronic therapies,” analyst Salveen Richter wrote in the note to clients Tuesday. “While this proposition carries tremendous value for patients and society, it could represent a challenge for genome medicine developers looking for sustained cash flow.”

The report refers to Gilead’s hepatitis C franchise, which has approximately a 90 percent cure rate among patients. In 2015, U.S. sales of the franchise topped $12.5 billion. However, since Gilead’s drugs have been very effective in curing the horrible infection that attacks the liver and leads to inflammation, sales have dramatically declined. Goldman expects U.S. sales for Gilead’s hepatitis C treatments will be less than $4 billion in 2018.

 

“GILD is a case in point, where the success of its hepatitis C franchise has gradually exhausted the available pool of treatable patients,” the analyst wrote. “In the case of infectious diseases such as hepatitis C, curing existing patients also decreases the number of carriers able to transmit the virus to new patients, thus the incident pool also declines … Where an incident pool remains stable (eg, in cancer) the potential for a cure poses less risk to the sustainability of a franchise.”

Gilead’s revenue and net income from 2006 to 2017 (in million U.S. dollars)

Goldman warns biotech clients that curing patients may not be “sustainable,” as Gilead’s stock peaked in 2015 and had been unraveling ever since.

While CNBC said the analyst did not respond to a request for comment, the report suggested three potential solutions for biotech companies to maximize profits:

  • “Solution 1: Address large markets: Hemophilia is a $9-10bn WW market (hemophilia A, B), growing at ~6-7% annually.”
  • “Solution 2: Address disorders with high incidence: Spinal muscular atrophy (SMA) affects the cells (neurons) in the spinal cord, impacting the ability to walk, eat, or breathe.”
  • “Solution 3: Constant innovation and portfolio expansion: There are hundreds of inherited retinal diseases (genetics forms of blindness) … Pace of innovation will also play a role as future programs can offset the declining revenue trajectory of prior assets.”

While it appears the universal rumor that cancer will never be cured could be right. It is shocking obviously that Goldman Sachs has confirmed — it is not in the business of healing patients, but rather keeping the American people in a perpetual state of illness to capitalize on their pain.