Gilead Plunges as Its Biggest Drug Blockbusters are Fading Fast

Updated on
  • Stock down 9.6 percent Wednesday, biggest drop since 2015
  • Company expects fewer patients, shorter time on hep C drugs

Gilead Sciences Inc. shares fell to their lowest level since 2014 on Wednesday after the drugmaker said its massive hepatitis C franchise is fading fast with fewer patients left to treat and increased price competition.

Revenue from the company’s drugs for the viral infection will be $7.5 billion to $9 billion in 2017, Gilead said in a statement Tuesday. That’s far below the $11.6 billion analysts had projected, according to data compiled by Bloomberg. The company sells three main hepatitis C treatments -- Sovaldi, Harvoni and Epclusa.

The shares plunged 9.6 percent to $66.10 at 9:36 a.m. in New York, the biggest intraday decline since August 2015 and the lowest intraday price since April 2014.

“This is a challenging situation,” Chief Executive Officer John Milligan said on a conference call with analysts Tuesday. The hepatitis C market is “declining faster this year than we would have predicted last year.”

The hepatitis C pills -- which have cut treatment times and side effects compared to older medicines -- were the biggest drug launch of all time, and are still massive products for the Foster City, California, company. But competitors Merck & Co. and AbbVie Inc. have cut into Gilead’s market share, forcing prices down, and the bulk of the easiest-to-find patients may already have been treated, meaning that sales are expected to continue to decline.

The average U.S. price of a one-month supply of Harvoni after discounts and rebates was less than $15,000 in 2016, Milligan said. For patients taking three months of treatment, that would be more than 52 percent off the list price of $94,500.

Shorter Treatments

Competition and shorter treatment duration for patients will reduce sales this year by $1.9 billion to $2.5 billion, compared to a year earlier, while fewer new patients starting on the drugs meant $2.9 billion to $3.8 billion less in 2017 sales, Gilead said in a presentation released along with the projections.

Read More: How Gilead is Looking for New Hepatitis C Patients With an Army Vet

While investors fret over what will replace the hepatitis C drugs, Gilead has said it wants to use acquisitions to fill its product pipeline. Yet it announced no new major deals, and instead increased its dividend by more than 10 percent.

CEO Milligan acknowledged that it would be “challenging to grow without some sort of acquisition” outside of the HIV franchise, and Chief Financial Officer Robin Washington said the company will focus on pursuing external opportunities in the coming year.

Fourth-quarter earnings, excluding one-time items, were $2.70 a share, beating analysts’ estimates of $2.61. Net income fell 34 percent to $3.11 billion, or $2.34 a share.

— With assistance by Doni Bloomfield

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