Patent Expert: It's Not Over For Gilead, Still Has Strong Defense Against Merck

In a new report, Citi analyst Robyn Karnauskas discusses the Gilead Sciences, Inc. GILD/Merck & Co., Inc. MRK patent lawsuit involving Sovaldi. The jury decision on the case is due next week, but a patent expert tells Citi that the issue is far from over.
 

According to Karnauskas, the dispute may not reach a definitive conclusion for another two to three years.
 

“Gven GILD’s claim that MRK had ‘unclean hands’ while obtaining information which helped writing of patents in question, this case could take ~2-3 years before reaching conclusion,” he explains.
 

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In the short-term, the patent expert tells Citi that investors need to be prepared for the jury in the current trial to take the easy route and award Merck all of the damages it is seeking. Merck has asked for $2.1 billion in damages, 10 percent ongoing royalties on Sovaldi and 8.9 percent royalties on Harvoni.

Regardless of the jury decision, the expert anticipates that the judge will then hear Gilead’s ‘unclean hands’ argument and could change the verdict and/or the damages. Gilead could also choose to formally appeal the decision, which the expert believes could take up to 18 months.

Citi believes that the worst-case outcome is already priced into Gilead’s stock. The firm maintains a Buy rating and $110 price target.

Disclosure: the author holds no position in the stocks mentioned.