Gilead finally ready to make a deal?
- Gilead reported product sales of $6.4 billion in the first quarter, down from $7.7 billion in same quarter a year prior. The decline was largely due to smaller patient populations in the hepatitis C market as more patients are cured by the big biotech's drugs.
- Meanwhile, sales of Gilead's HIV and hepatitis B products continue to tick up. Sales for those products were $3.3 billion for the quarter, up from $2.9 billion in the first quarter of 2016. This was driven by tenofovir alafenamide (TAF) based products, including Genvoya (elvitegravir/cobicistat/emtricitabine/tenofovir alafenamide), Descovy (emtricitabine/tenofovir alafenamide) and Odefsey (emtricitabine/rilpivirine/tenofovir alafenamide).
- Gilead has been shifting focus to non-alcoholic steatohepatitis (NASH). The company presented data from one of its lead compounds earlier this year and has started two Phase 3 trials for its ASK-1 inhibitor selonsertib.
Like big pharma counterpart Pfizer, which reported earnings several hours earlier, declining revenues weren’t so much the focus as was how business development could be the solution.
Investors have long been pressuring Gilead, which has $34 billion in cash on hand, to start making some deals that could help pad the losses from its wildly-successful but declining hepatitis C franchise. Analysts have even gone as far as to suggest the company spin off its hep C drugs into a separate royalty company while resources are directed elsewhere.
Gilead has thus far been cagey about what it will do with the piles of cash it has on hand. But recent comments from CEO John Milligan on the company’s first quarter earnings call Tuesday afternoon could mean investors finally get some answers.
"We really focused our efforts on broadening our team, adding some depth both scientifically and with business development experience so that we in fact have much, much greater capacity to assess things and are in fact fully engaged with our teams assessing a number of different opportunities, which we think could play out over the coming year as we start to make progress in getting partnerships and potential acquisitions together," said Milligan on the call.
The CEO also talked about the kinds of deals that Gilead is looking for.
"Certainly as we think about opportunities, we do look for things which have potential to have a high operating margin. That's important to us. That of course informs the potential cash flow from the business in the future. We also of course look for things that have a scientific and medical need such that we can build a sustainable business that would have the top line growth that we desire, along with those margins and cash flows," he added.
Unlike Pfizer CEO Ian Read, who noted Tuesday morning that macro uncertainties like tax reform are keeping Pfizer from making deals at the moment, Milligan seemed unfazed by what is going on in politics.
"I think that uncertainty in Washington seems to be the norm in my 27 years here," the exec said. "So I think we've kind of learned to filter that out and focus on the things that are right for the company. There may be tax reform. There may be repatriation, but you can't count on it and you can't wait for it either."
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