Generics makers to sell Gilead's Yeztugo at $40 a year under deals with Gates Foundation, others

Indian generics producers Dr. Reddy’s Laboratories and Hetero Labs are advancing plans to launch generic versions of Gilead Sciences' twice-yearly HIV PrEP drug, Yeztugo (lenacapavir), in 120 low- and middle-income countries. Dr. Reddy's, in partnership with Unitaid and CHAI, aims to offer the drug for $40 annually by 2027, matching daily oral PrEP costs, while the Gates Foundation is backing Hetero Labs and investing over $80 million to accelerate market entry and scale delivery. These efforts, facilitated by Gilead's royalty-free voluntary licensing, are expected to create competition and lower prices, though activists highlight that the 120-country scope excludes several key high-burden regions, prompting Gilead to pursue additional access strategies for these areas.

Analysis

Gilead Sciences (GILD) is proactively shaping the market for its new twice-yearly HIV PrEP drug, Yeztugo, by facilitating generic competition in 120 low- and middle-income countries (LMICs) well ahead of schedule. The company's royalty-free voluntary licensing agreements, signed even before the drug's approval, have now materialized into concrete partnerships for Indian generic manufacturers. Dr. Reddy’s Laboratories (RDY), supported by Unitaid and CHAI, is set to launch a generic version by 2027 at a price point of $40 per year, achieving cost-parity with existing daily oral PrEP medications. Simultaneously, Hetero Labs is being backed by the Gates Foundation, which is also injecting over $80 million in catalytic funding to accelerate market readiness. For Gilead, this strategy sacrifices direct royalty revenue from these territories but builds significant ESG credentials and goodwill, likely mitigating the risk of compulsory licensing and public pressure. However, this approach faces criticism from activist groups, who highlight that 26 high-burden countries, accounting for over a quarter of new global HIV infections, are excluded from the agreements. Gilead has acknowledged this gap and is reportedly pursuing tiered pricing and other partnerships for these excluded middle-income markets, indicating a complex, multi-layered global access strategy.

Key Decisions for Investors

• For Gilead (GILD) investors, this development reinforces the company's ESG narrative but also confirms that revenue from Yeztugo in 120 LMICs will be minimal; focus should remain on the commercialization strategy and pricing power in high-income and excluded middle-income countries, which will drive the drug's ultimate financial value.
• For Dr. Reddy's (RDY) investors, this is a distinct positive catalyst, as the agreement secures a long-term, high-volume production opportunity for an advanced injectable starting in 2027, with the partnership de-risking market access and distribution.
• Investors should monitor potential developments in the 26 countries excluded from the licensing deal, as any future pricing concessions or government actions in key markets like Brazil or Mexico could materially alter Gilead's global revenue projections for Yeztugo.