A combination of slumping revenues from its hepatitis C drugs and three late-stage pipeline failures sent Gilead into a slump, and has increased calls for a major acquisition.
Sales of its hepatitis drugs Sovaldi, Harvoni and Epclusa were down $1.5bn in the same period of 2015 to $3.3bn, with overall revenues down almost 10% to $7.5bn as gains for Gilead’s HIV portfolio were not enough to compensate.
While the decline was anticipated because of price pressure, increased competition and a fall-off in demand in hep C, the trio missed consensus expectations by around $300m – despite a strong start for latest entrant Epclusa (sofosbuvir and velpatasvir), which contributed $533m in the quarter.
The financial pressure – coupled with Gilead’s decision to call time on non-alcoholic steatohepatitis (NASH) candidate simtuzumab, GS-5745 for ulcerative colitis and Crohn’s disease and cardiovascular candidate eleclazine in its lead indication – has investors asking the company to make use of its ample cash reserves and bulk up its pipeline.
The company has a history of making successful bolt-on acquisitions – adding its HIV blockbusters with the purchase of Triangle Therapeutics in 2003 and hepatitis portfolio by buying Pharmasset in 2011 – and investors want the company to repeat the trick. Smaller deals – including a $1.2bn deal for another NASH drug developed by Nimbus Therapeutics – are not enough to satisfy some.
Chief executive John Milligan maintained a determined stance on that score, however, telling analysts on a conference call that while the company is “focused on augmenting our portfolio with external opportunities, particularly in the field of oncology,” it intends to “keep the bar high” in its search.
Milligan continued: “You don’t want the sense of urgency to overwhelm your discipline because then you’ll do things that don’t make long-term sense.”
“That’s been the history in all businesses, and that’s one we apply here. So we’re currently very, very active. We’ll do things when they make sense for us and not before then.”