With Shrinking of USD 5 Billion, What Can Gilead Use to Fill the Gap Caused by the Decline of the "Miracle Drug"?

Readers can find in the 2016 financial reports issued by several transnational pharmaceutical giants recently that sales of AbbVie’s Humira, Gilead’s Harvoni/Solvadi, and Celgene’s lenalidomide accounted for 30%-60% of the annual total revenue of their respective companies, namely, sales of those drugs have very significant influences on performance of the companies, which has been clearly proved by the performance trend of Gilead: its direct-acting antiviral (DAA) Harvoni/Solvadi led the market value of the company to USD 160 billion, but the particularity of the HCV disease and the excellent therapeutic effects of the said DAA have resulted in the revenue of the HCV series products of Gilead to constantly shrink, which will continue. What could fill the huge gap once the "miracle drug" for HCV fell off the miracle path?

I. Performance of the anti-HCV products starting to comprehensive shrink, Gilead largely reducing the revenue expectation

I have analyzed the product line of Gilead in the previous With Continual Increase of Downward Pressure of Revenue Expectation, How Could Gilead Retain the "Supremacy" and Whether It Would Become the Last Blooming of the HCV Drug Market by Beach Landing on the "Third World" China?, and summarized and compared the major companies in the HCV drug market: Gilead gained the absolute supremacy of the HCV drug market in 2014 by depending on the strong force exerted by Harvoni/Solvadi; Gilead occupied most of the market shares of the HCV drug market with the "miracle drug" for HCV, as shown in the following figure:

Several anti-HCV products of Gilead did have stunning performance, however, the sales of Harvoni/Solvadi shrank by USD 5 billion as shown in its 2016 financial report, and TAF had excellent performance in HIV treatment and HBV treatment, but it still could not make up for the huge deficiency brought by the shrinking of anti-HCV products. Data show that Gilead’s performance grew by 31.1% in 2015 fiscal year, but the performance shrank by nearly 6.7% in 2016 fiscal year, which was closely related with the sales decline of anti-HCV products of the company, and its share price has declined to that when Solvadi (sofosbuvir) was just marketed (as shown in the following figure).

II. How will Gilead do in the face of the huge downward pressure of revenue expectation?

Performance of Gilead grew by -6.7% in 2016. Gilead had rapid growth in the performance of the HIV and HBV treatment fields as mentioned above, but its HCV drug market will continue to largely shrink. The 2017 sales revenue of Gilead’s anti-HCV products is only expected to be USD 7.5-9.0 billion, with large shrinking of nearly USD 5 billion; the total sales revenue in 2017 fiscal year is expected to be flat compared with that in 2014 fiscal year, being USD 22-25 billion.

The DAA drug developed by Gilead has opened the new era of HCV treatment and made outstanding contributions to the cure of HCV in the world, which is quite remarkable. The company indeed faces very huge downward pressure of revenue expectation, but in fact, Gilead can still have expectations, and it has started the followings in the face of the great challenges brought by the HCV drug market:

1. Pay close attention to the huge HCV drug market of the developing counties, for example India, China, Brazil and Mexico, etc. still have quite huge demands for HCV treatment. I mentioned in Whether It Would Become the Last Blooming of the HCV Drug Market by Beach Landing on the "Third World" China? that the HCV treatment has not received sufficient attention in China where the treatment is gravely insufficient and there is a huge market demand. Gilead is active in entering the Chinese market, with Sovaldi (sofosbuvir) expected to successfully enter China in 2018 and the specific drug Epclusa expected to enter the Chinese market in 2019.

2. Develop and expand the excellent product development pipelines, with high potential of product upgrading and updating. The antiviral products of Gilead now account for about 90% of the company’s revenue. The company has been committed to developing innovative drugs, and is gradually expanding to fields including liver diseases, cardiovascular field, oncology, and respiratory field, etc., with many products having entered Phase III clinical trials, and its HBV tenofovir and HIV product line are much anticipated.

3. Making excellent M&As can also be a very important means for Gilead, and its Sovaldi (sofosbuvir) has been proved to be a very successful "deal". There were comments that Gilead missed the good opportunities to acquire Pharmacyclics and Medivation in 2016, which were acquired by AbbVie and Pfizer, but I don’t think such comments to be objective and I think Gilead’s success or failure would also not be decided by that.

The scale of the HCV drugs is amount to USD 6-7 billion in the next decade. With its supremacy in the HCV drug field still unshakable, Gilead will continue to have a decline in the performance in the next years, but it is unnecessary for us to worry about too much for Gilead because it will still be okay.