Shares of Gilead Sciences ticked up Friday morning after the company’s latest earnings report exceeded Wall Street’s expectations.
The results were, in part, tied to growing sales from Gilead’s cell therapy business, which consists of the marketed cancer drugs Yescarta and Tecartus. Together, sales from the two drugs totaled $398 million in the third quarter, a nearly 80% increase from the same three-month period a year prior.
Gilead’s work in cell therapy, catalyzed by the $12 billion acquisition of Kite Pharma in 2017, hasn’t always sat well with investors. Early sales from Yescarta were slower than some had hoped, and Gilead ultimately acknowledged that some assets from the Kite deal were overvalued.
But in recent months, the company’s cell therapy business has ballooned. Third quarter sales of Tecartus were up 72% year over year, reaching $81 million, while those for Yescarta rose 81% to $317 million. Gilead cited the approval of Yescarta as a “second-line” therapy for a type of hard-to-treat lymphoma, which happened in April, as a main reason for the uptick.
Other cell therapy developers have recorded larger sales from their products as well, though not to the same extent as Gilead.
Bristol Myers Squibb said revenue from its marketed therapies Abecma and Breyanzi totaled $151 million in the third quarter, reflecting a nearly 50% increase year over year. Carvykti, a multiple myeloma drug co-developed by Johnson & Johnson and Legend Biotech, has also been generating more revenue, with about $55 million in sales between July and September.
Carvykti, along with Bristol Myers’ and Gilead’s drugs, are what’s known as CAR-T cell therapies, which have proven to be effective weapons against an assortment of blood cancers.
Yet, these treatments are difficult to make, as the process involves removing T cells from a patient, engineering them to better fight cancer, and then reinfusing them. The process has been made more difficult, too, by an industry-wide shortage of viral vectors, a key component for CAR-T medicines.
Looking to add stability, developers have turned to building out their own production capabilities. Gilead, for instance, announced earlier this month that the Food and Drug Administration had approved its new 100,000-square-foot facility for vector manufacturing.
Johanna Mercier, Gilead’s chief commercial officer, said on a call with investors Thursday that with the newly authorized plant, Kite, which oversees the company’s cell therapy work, “remains well-positioned to ensure clinical and commercial supply availability.”
Even so, Gilead doesn’t foresee its cell therapy business staying on such a steep upward trajectory. Chief Financial Officer Andrew Dickinson said Thursday that the company expects slower growth quarter to quarter, as demand from Yescarta’s recent approval starts to stabilize and as competitors implement manufacturing improvements.
Gilead ended the third quarter with $7 billion in revenue, down 5% from the previous year. If the company’s COVID-19 treatment Veklury, which has declined significantly, were excluded, product sales would be up 11%.
According to Salim Syed, an analyst at the investment bank Mizuho Securities, the consensus on Wall Street was that Gilead’s product sales would be just over $6 billion for the quarter. Many of the company’s drugs for cancer, HIV and hepatitis C, and even Veklury, outperformed expectations.
The company “basically beat everywhere of importance,” wrote Steven Seedhouse, an analyst at Raymond James, in a note to clients.
Gilead shares were up 11% late Friday morning, to trade at roughly $78 apiece.