The Market Potential of Oral Remdesivir

Disclaimer: This post does not constitute financial advice. Do your own due diligence before making an investment.

Now that Matinas Biopharma’s Lipid Nano-Crystal (LNC) platform has basically been shown to be safe, effective, and to reduce toxicity, it’s time to start thinking about the market potential of oral remdesivir.

This is a tricky calculation.

Remdesivir is notoriously difficult to produce. Before the pandemic, it took Gilead a year to manufacturer it. This is because the method involves many complex chemical interactions. Remdesivir also needs a slew of ingredients sourced from all over the world. So, even if oral remdesivir works, there could be supply issues that limit sales.

But, if an LNC formulation of oral remdesivir can replicate the results seen in the lab that encouraged the NIH to rush human trials to the front of the queue…then the manufacturing of remdesivir will become a top priority.

Making a lot of remdesivir is a major pain. But at least now it only takes six months. Gilead has signed agreements with several manufacturers like Pfizer and Dr. Reddy's (one of India’s largest drug companies) to help with production.

Short-term supply issues will be resolved if oral remdesivir becomes a top priority because humans are pretty good at solving problems like that.

For the market potential of oral remdesivir, we’ll be looking at three companies.

1. Gilead Sciences (owns the drug.)

2. Matinas Biopharma (owns the delivery system, LNC.)

3. Ligand Pharmaceuticals (manufacturers captisol, a key ingredient in remdesivir.)

During Q2 of 2021, Gilead reported remdesivir sales of $829 million. Annualized, this is $3.3 billion. Ligand makes roughly 100M/year from selling captisol. Matinas is still a young company and has no revenue. (Yet.)

These are the sales numbers we’ll start with. They aren’t perfect because the demand for remdesivir fluctuates with Covid-19 waves, vaccination rates, and waning antibodies.

(This article makes a ton of assumptions, and you should consider all of this to be speculation.)

Okay, so let’s assume that Matinas’ LNC oral remdesivir works and is amazing for four big reasons.

1. It’s easier to deliver (pill form instead of intravenous).

2. It can be administered earlier in the course of disease (doesn’t require hospitalization).

3. It is less toxic than remdesivir (can be given to more patients, for longer).

4. It can be given before symptoms or even diagnosis. (Like a temporary vaccine.) If oral remdesivir isn’t toxic and has no harmful side effects, then it might make sense for health care workers in Covid-19 hotspots to take oral remdesivir even if they’re vaccinated.

Let’s run through some various scenarios and see what might happen to the share price of each company.

Caveat: There are endless scenarios in which this could play out. I’m assuming price stays the same, but since it’s a different drug, possibly needed by billions of people, there’s a possibility that as demand goes up, price drops. We’ll assume that any increase in demand will offset the drop in the price. This is probably wrong, but there are too many variables to account for, so the best we can do is make ballpark assumptions. None of these scenarios will be correct. But one of them will probably be sort of correct.

A hand grenade and horseshoes type of deal. Getting it close is still a win.

Scenario 1: Demand for remdesivir stays the same.

In this scenario, nothing changes except intravenous remdesivir is phased out and replaced with LNC oral remdesivir.

For Gilead to repackage remdesivir with LNC, they’ll either need to buy out Matinas, or pay for a licensing agreement. Let’s assume the licensing fee is 5% (a conservative number for such an important drug.)

All things remaining equal, Matinas would generate revenues of $165 million. Gilead would make 5% less revenue on remdesivir. Ligand is unaffected.

Gilead makes about 25B/year, so a revenue drop of $165 million is irrelevant.

Given that Matinas has a market cap of roughly 225 million, a revenue boost of $165 million/year would materially affect their stock price. With a conservative P/E ratio of 8x, this would give them a market cap of 1.3B. This would be reflected with a roughly 445% boost to the share price.

This is the least likely of scenarios if oral remdesivir is proven to work.

Scenario 2: Demand multiplies.

If demand for remdesivir doubled, Gilead would earn $6.6 billion from remdesivir (before licensing fees.) Gilead has a miserable P/E ratio compared to its peers, so a (possibly temporary) revenue boost might not excite the market. Share price could rise a meager 12%. 

Matinas would earn $330 million. Share price could rise 1073%.

Ligand would make an additional $100M/year. This would push their revenues higher than 2018 (their best year), when the stock price peaked at $275. Ligand could return to that, which represents a 100% increase in share price.

Here’s the potential boost in share price to Matinas for 1-10x oral remdesivir sales with a P/E ratio of 8.

Here is that same chart with a P/E ratio of 16.

Here is potential share price boost for Gilead and Ligand.

Note: calculations for Ligand and Gilead are different than Matinas. Matinas licensing/royalty fees would be close to pure profit, whereas Gilead and Ligand have significant expenses associated with increased revenue.

While this article is focusing on the market potential of LNC oral remdesivir, just remember this potential share price boost to Matinas would come from just a single drug. This isn’t taking into account the other two drugs in their pipeline, or any future collaborations (of which there will be many.)

The upside potential for Matinas Biopharma is truly remarkable. At this market cap it’s unlike anything I’ve ever seen before.

Scenario 3: Massive price reduction.

The worst-case scenario for stock prices is one where demand stays the same and Gilead drastically reduces the price of oral remdesivir. Matinas would be compensated with smaller royalties. While unlikely, this would still represent a boost in revenue for Matinas. It would also further validate their LNC platform.

Matinas’ share price would still go up, but Gilead’s would probably go down. Ligand would probably be unaffected unless demand also drops (which is unlikely unless Covid-19 vanishes overnight.)

I could outline a hundred more scenarios and a hundred different outcomes, but that would be pointless. There are just too many variables to this problem.

You’ve got economic issues (supply and demand.)

Health issues (effectiveness, toxicity, administration, distribution.)

Political issues (The World Health Organization, anti-vaxxers could become anti-druggers, lobbyists for vaccine companies could interfere with oral remdesivir, etc.)

It’s overwhelming. This is a butterfly flapping its wings and causing a tornado in Dubai type of situation.

Given that Matinas’ market cap is tiny (a reflection of zero revenue) they clearly have the most to gain if an oral LNC formulation of remdesivir is proven safe and effective.

How high the stocks will go is impossible to know, which is why I posted the charts with various sales multiples. These will not be correct. Things are going to change, namely pricing and demand.

The numbers posted in above are just to give you a broad idea of where things might go. Which I think is helpful. Especially when looking at smaller companies.

Matinas might also get away with charging a higher royalty. (You can double the numbers in the Matinas charts above if the royalty is 10%)

If LNC oral remdesivir is the best format for the drug, Gilead will be obligated to use it. A 10% royalty for a private insurance patient ($3,120 per course) would be $312. Instead of making less money, Gilead could simply pass the cost increase on to the insurer.

Don’t forget, when Gilead was pricing remdesivir, it was taking into account the savings to the healthcare system. Getting people out of the hospital five days sooner is worth a lot of money.

A report published in Canada estimates that it costs more than $50,000 to care for a severe Covid-19 patient. That’s a lot of money. We need LNC oral remdesivir and we need it now.

If oral remdesivir provides a superior standard of care, and saves hospitals lots of money, then ICER (the drug cost watchdog) will likely allow for higher pricing. They will definitely re-evaluate it since LNC oral remdesivir is technically a new drug.

Since it’s impossible to say exactly how much these companies will climb in value if LNC oral remdesivir becomes a better standard of care, all we can say is “up.”

Some potential roadblocks to skyrocketing stock prices

The reduced spread of Covid-19 might mean reduced demand for Covid-19 drugs. If oral remdesivir becomes the Magic Covid Pill and fixes everything, then sales would drop dramatically. This could be offset by stockpiling, but that isn’t a reliable source of revenue.

As demand goes up on a product critical to the welfare of society, public pressure increases to reduce prices. (See housing, food, gasoline.) If Gilead is too greedy with pricing, then governments will simply violate their patents in the name of the public good. (Hence why vaccine doses are so cheap relative to their to benefit.)

Covid-19 is probably here to stay. Given anti-vaxxers, variants, and waning antibodies, we are unlikely to fully beat this thing in the near future. Demand for covid-19 drugs could be indefinite.

FYI: Remdesivir attacks Covid-19 from a different angle than the vaccines, so new variants are unlikely to affect its efficacy. (Per the CEO of Gilead.)

What we want to see from oral remdesivir human trials

While it would be great if it cured Covid-19, trial results are unlikely to show this. People get infected at different rates. They have different viral loads. It will be tough to find trial subjects that were diagnosed with Covid-19 before they start showing symptoms.

So really what we’ll be looking for is: Does this drug prevent people from progressing to severe Covid-19 which requires hospitalization? That’s where all the hospital savings are. LNC oral remdesivir will probably be prescribed to demographics which are more likely to end up in the ICU: the obese, the elderly, and the unvaccinated.

I could see them running a bunch of different trials to try and figure out how good oral remdesivir is.

1. A trial on high-risk unvaccinated people.

2. A prophylactic trial for front-line health care workers.

3. A trial on people who test positive for Covid-19, but before symptoms are shown.

4. A trial on people who test positive for Covid-19, are unvaccinated, and at high risk of being hospitalized.

Running trials on vaccinated people will be tricky because antibodies seem to fade as time goes on. Oral remdesivir would appear much more effective in someone who got their second mRNA vaccine three months ago, versus someone who got their second dose seven months ago.

All in all, it’s a giant mess and I’m thrilled I don’t have to clean it up.

In the end

There are too many variables to accurately project cashflow from LNC oral remdesivir. This article assumes that oral remdesivir is a safe and effective treatment for Covid-19. While I believe this to be highly likely, we won’t know for sure until they run human trials.

But, if an LNC formulation of remdesivir is proven safe, non-toxic, and highly effective at preventing the spread of Covid-19, or preventing at-risk demographcis from being hospitalized, the upside potential for Matinas Biopharma is somewhere between 445% and 21,618%.

Gilead and Ligand are the safer plays, but Matinas has significantly higher upside. An investment of $10,000 in Matinas could be worth $2,171,800 in a few years.

And that’s with the sales from just a single drug. They’ve only scratched the surface of LNC. In 20 years, there could be thousands of drugs converted to the LNC platform.

Matinas might be greatest investment opportunity in the history of small cap biotech.

Gilead’s upside could also be much larger than what’s shown in the graphic. Most other big pharma companies have market caps closer to 5-6x revenue, whereas Gilead’s is only 3.5x. Wall Street has been hating on Gilead for years, but oral remdesivir could change that, so Gilead’s upside could be more like 24% per doubling of remdesivir sales.

I apologize this article isn’t longer.

I had originally planned it to be quite a deep dig, but there are just too many variables to account for. I will update these calculations, and continue do research and projections for Matinas, Gilead, and Ligand as oral remdesivir works its way through human trials.

In summary: If LNC oral remdesivir becomes a better standard of care, Gilead’s stock price will go up moderately, Ligand will go up significantly, and Matinas will jump extremely high. Like halted several times, lead story on CNBC, and trending on every message board high.

People see companies with stock prices around a dollar, with market caps less than 500 million and automatically think they must be junk. While this is true of many penny stocks that trade OTC, it’s not true of biotech companies listed on major stock exchanges.

Biotech stocks are fun because they tend to be either worth zero, or billions. Their drugs and therapies either work, or they do not.

Investing in biotech is exciting because when you’re right, you’re right big. I find this notion attractive. It’s also more exciting. Like betting on a race, except instead of horses, it’s rocket ships.

For now, I remain long and strong Matinas. (Also Gilead.)

Good luck with your investments, and don’t forget to follow us on Twitter for more in-depth analysis.