How will Gilead price CAR-T? With Kite buy, the top biotech joins Novartis in spotlight

After a long wait, Gilead Sciences finally scored its big deal on Monday, picking up Kite Pharma and the biotech’s promising CAR-T treatment Axi-Cel. It also picked up a pricing dilemma, as activists target the cost of treatments developed with federal funding.

As CAR-T technology nears the market, there’s been no shortage of talk about how much the medications—which can cure certain cancer patients with few or no options—will cost. Over the last year, Kite and Axi-Cel have moved into a leadership position in the field, with only Novartis ahead on the push to market.

And if Novartis' experience is a guide, Gilead faces potential pushback. The Swiss drugmaker last week said it would invite talks with one critic who highlighted taxpayer funding for CAR-T research. The Kite and Novartis medications are up for two different rare disease indications, in refractory aggressive non-Hodgkin lymphoma and B-cell acute lymphoblastic leukemia (ALL) respectively. Kite's FDA action date is November 29.

When asked about CAR-T pricing and cost on Monday’s conference call announcing the $11.9 billion buyout, Gilead COO Kevin Young said his company can’t yet offer many details. Young did, however, highlight the great deal of innovation and results associated with the treatment. He said that’s a good "starting point" with payer negotiations and added that Gilead expects "healthy reimbursement" talks with payers.

In a note following the deal, Evercore ISI analyst Joshua Schimmer said some investors expect a price of $400,000 to $500,000 per treatment. Edison analyst Maxim Jacobs told the Financial Times he’s anticipating a price of about $750,000 per patient.

Last year, England health officials concluded that a price of $649,000 in childhood leukemia would be warranted for CAR-T because of the extra years the technology can offer young patients.

Novartis will likely have to produce numbers first: It's positioned to reach the market ahead of Kite with its CAR-T with its med, CTL019, to treat pediatric and young adult patients with B-cell ALL. The drug won an FDA panel’s unanimous backing in June.

Last week, Novartis CEO Joe Jimenez invited pricing activist David Mitchell, founder of Patients for Affordable Drugs, plus other experts to a discussion on the new drug class and its cost. Mitchell believes that because U.S. taxpayers funded early work on the technology, they should come up with reasonable pricing.

But R&D spending is just one part of the CAR-T equation. Made from re-engineered T cells, the drugs are expensive to manufacture. Those expenses, plus logistical challenges, also play into CAR-T pricing. Kite last year opened a state-of-the-art facility near the Los Angeles International Airport in order to ensure quick receipt and shipment of T cells to and from patients in the U.S. and Europe.

Additionally, the issue of taxpayer-funded medical technology has drawn new scrutiny. Questions about pricing on therapies created with federal support have made dozens of headlines as criticism has mounted on Sanofi’s Zika vaccine and its proposed license from the U.S. Army.

Washington, D.C., nonprofit Knowledge Ecology International has turned a spotlight on taxpayer-funded drug research, CAR-T and Sanofi’s Zika vaccine included. The nonprofit’s director James Love maintains that with the new acquisition, Gilead should ensure taxpayers fair prices. In its statement, KEI pointed out Kite’s disclosures that it spent $317 million on R&D between 2012 and June 30, 2017, far short of its $11.9 billion selling price.

In addition to urging fair prices for the U.S. public, KEI is also requesting Gilead license Kite's CAR-T patents to the Medicines Patent Pool to expand access in developing countries around the globe, Love said. Such an arrangement would require licensing partners to have expertise in CAR-T manufacturing, however.

According to Schimmer, consensus revenue estimates for Kite are about $200 million for 2018, with the figure growing to about $1.2 billion in 2021. The majority is expected from Axi-Cel.

Regardless of where Gilead ends up with its price, it’s likely to be expensive. Though superpricey medications for small populations can be quite successful commercially, they aren't always, as some recent launches have shown. Biogen’s spinal muscular atrophy drug Spinraza, which costs $750,000 for the first year, has taken off quickly out of the gate, while uniQure’s trailblazing gene therapy Glybera is slated for market withdrawal on lack of demand.

Of course, Gilead is no stranger to pricey medications and controversy. The company launched the infamous $1,000-per-pill hep C drug Sovaldi back in 2014, and followed that up with the even costlier Harvoni the next year.

While the company brought in billions in sales, Gilead was the target of a wide range of activists and officials who said the company acted for profit and not patients. It wasn’t until AbbVie and Merck & Co. introduced new competition, triggering big discounts and rebates, that the healthcare system got relief in the treatment area.

With its hep C meds struggling in recent quarters, Gilead has been facing growing pressure to do a deal. Even with the Kite buy, Gilead CEO John Milligan said on Monday’s call that the company won’t be going "quiet" and still plans to scout future acquisitions.