Gilead Sciences (NASDAQ:GILD) and Merck (NYSE:MRK) have historically been rivals in the HIV drug market. Now, though, the big companies are teaming up to develop a long-acting HIV therapy. In this Motley Fool Live video recorded on March 17, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss how Gilead and Merck's surprise partnership could shake up the HIV drug market.

Keith Speights: All right, so let's switch to another non-COVID topic. Kind of a surprise here, Gilead Sciences -- the ticker there is G-I-L-D -- and Merck -- ticker there's M-R-K -- announced earlier this week that they're teaming up and they're going to develop a two-drug long-acting HIV therapy. These companies were competitors and so they're joining forces. The combo is going to include one of Gilead's HIV drugs, one of Merck's drugs.

What do you think about these two rivals joining forces and how do you think it might shake up the dynamics in the HIV drug market, Brian?

Brian Orelli: Yeah, so the drugs there have gotten really good as they're going to get. We've got a single pill combo that can get you down to undetectable levels. Then how do you compete with undetectable levels? You can't get below undetectable.

So the last frontier is really these long-lasting drugs. ViiV, which is a joint venture between GlaxoSmithKline (NYSE:GSK), Pfizer, and a Japanese drugmaker called Dovato -- that's the drug name. But there's a Japanese company as well in the three-company joint venture.

These three companies came together basically to challenge Gilead's dominant position. Now Gilead needs to team up with Roche to fight back. This deal is really interesting. I'd like to have been a fly on the wall in the negotiating room or maybe for 2020, [laughs] the version is a hacker spying on the Zoom call because I'm sure they did it all virtually in the negotiation process. But they're going to develop both oral and injectable versions of the combination.

Gilead's leading the US and Merck is leading the rest of the world for the oral and then it's the exact reverse for the injectable. The Merck will lead the US and Gilead will lead the EU and rest of the world. It's a 60-40 split between Gilead and Merck. They must have come up with that number, negotiated that number based on how much they thought the value of Gilead's drug was versus Merck's. Then Gilead will get more, a larger percentage of the split once the sales hit a certain threshold.

Speights: Is this bad news for GlaxoSmithKline?

Orelli: I mean, GlaxoSmithKline, they are the largest shareholder of ViiV. I would definitely say Gilead and Merck together are a bigger competitive threat to ViiV and therefore GlaxoSmithKline than either one of the drugs individually.

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