Gilead investors hold their breath as trial readouts near
- Gilead Sciences' planned return to revenue growth appears to be on hold for another year, raising the stakes for the California biotech as it awaits results from a set of late-stage clinical trials testing experimental drugs in rheumatoid arthritis and non-alcoholic steatohepatitis.
- Product sales fell by 16% in 2018, declining to $25.6 billion as Gilead earned significantly less from its portfolio of hepatitis C drugs. Despite previous comments indicating 2019 could see a turnaround, company executives predicted revenues this year to remain flat at best or even drop further.
- The shaky forecast could test the patience of investors and present an early challenge for incoming CEO Daniel O'Day, who is set to take over Mar. 1. "Where's the growth?" asked Leerink's Geoffrey Porges in a Feb. 5 note to investors. "The long-anticipated return to revenue growth in 2019 has been disappointing."
After riding the at times controversial success of its hepatitis C therapies, Gilead has been searching for a second act.
That hunt comes with some urgency, in part because hepatitis C sales have rapidly eroded, dropping from $19 billion in 2015 to $3.7 billion last year as fewer patients begin treatment and competition drives prices down.
Sales forecasts for the year that came in lower than 2018's totals could raise further pressure, although Raymond James' Steven Seedhouse questioned whether Gilead took a conservative approach.
"2019 product revenue guidance was a bit confusing though, given it implies a [year-over-year] decline at the midpoint, despite recent indications that 2019 would be a growth year for Gilead," Seedhouse said in an investor note.
"However, we think Gilead is simply being conservative in order to avoid setting up new CEO Daniel O'Day (starting March 1st) to miss guidance that he didn't even set in his first year."
A $12 billion buyout of Kite Pharma in 2017 brought with it the CAR-T therapy Yescarta (axicabtagene ciloleucel) and a foothold in immuno-oncology. But last year's results make clear that return on that investment will be slow to materialize.
Sales of the cell therapy totaled $264 million in 2018 — well above that of Novartis' rival CAR-T Kymriah (tisagenlecleucel) but reflective of significant roadblocks in commercial roll-out of the complex treatment. An $820 million write-off for another currently experimental CAR-T asset acquired in the Kite deal has raised further questions.
Gilead's near-term prospects, then, will ride heavily on its HIV business, as well as on how well three investigational drugs perform in a set of five late-stage studies set to read out in the coming months.
Upcoming data readouts will be hugely important to Gilead's growth prospects
|Trial name||Drug||Indication||Expected readout||Expected filing|
|STELLAR 4||selonsertib||Advanced fibrosis due to NASH||1Q 2019||2H 2019|
|FINCH 1||filgotinib||Rheumatoid arthritis||1Q 2019||TBD|
|FINCH 3||filgotinib||Rheumatoid arthritis||1Q 2019||TBD|
|STELLAR 3||selonsertib||Advanced fibrosis due to NASH||2Q 2019||2H 2019|
|DISCOVER||Descovy||HIV prevention (PrEP)||2Q 2019||TBD|
SOURCE: Company presentation
Particularly important is a drug called filgotinib, in testing for rheumatoid arthritis. Positive data from an earlier Phase 3 study last fall has raised Wall Street's expectations of how well the drug can compete in a crowded market.
Success is also expected in two studies — FINCH 1 and FINCH 3 — that are expected to read out data between now and the end of March. Gilead is also running a safety study called MANTA that it plans to use to support filing for an approval in the U.S.
"Once we have the Phase 3 data from 3 FINCH studies in hand, we will initiate and request further interactions with the FDA and other regulatory groups worldwide," said research chief John McHutchison in a Feb. 4 conference call.
Investors are paying close attention to selonsertib too. It's the first of several drugs Gilead is testing in non-alcoholic steatohepatitis, a liver disease more commonly known as NASH that's expected to soon become the leading cause of liver transplant in the U.S.
No drugs are approved to treat NASH and researchers have not yet hit on a consensus approach to addressing the inflammation and liver scarring characteristic of the disease.
Success in STELLAR 3 and STELLAR 4 would go a long way in validating Gilead's efforts in the space and convincing investors of the drug's worth.
Selonsertib is also key to Gilead's aims to combine several drugs together to more effectively treat NASH.
Until Gilead has results in hand, however, Wall Street appears to be taking a wait-and-see approach toward Gilead and its pipeline.
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