How Gilead Lost $7.8B in October Alone

Gilead Sciences’ third-quarter financial results were dismal, to say the least.

Total revenues for the quarter were $6.5 billion, down from $7.5 billion in the previous year’s third quarter. In the nine-month period in 2017, the company reported total revenue of $20.2 billion compared to $23.1 billion the previous year.

The primary cause for the drop was related to hepatitis C (HCV) sales. HIV and hepatitis B (HBV) sales were $3.6 billion for the third quarter, up from $3.5 billion for the third quarter in 2016, which, if not dazzling, were reasonably stable and even growing a bit. This was related mostly to continued uptake of the products based on tenofovir alafenamide (TAF), Genvoya, Descovy and Odefsey.

The HCV sales, which are made up of Harvoni, Sovaldi, Epclusa and Vosevi, were $2.2 billion for the third quarter, down dramatically from $3.3 billion in the third quarter last year. The company indicated the decline was because of lower sales of Harvoni and Sovaldi across all major markets. They were offset somewhat by sales of Epclusa, which was approved in the U.S. and Europe in June and July 2016, respectively. In addition, they were offset somewhat by sales of Vosevi, which was approved in the U.S. and Europe in July 2017.

At least one reason for the decline is because the drugs are so effective. Harvoni and Sovaldi essentially cure hepatitis C, which makes the patient population smaller. Good for patients, not so good for long-range sales.

There’s a fair amount of embarrassment on the part of Gilead management, not because of the sales slip, but because they totally didn’t see it coming. In February, the company gave a downward sales forecast for its HCV franchise, but in July showed more optimism, pushing the lower end of its 2017 forecast from $7.5 billion to $8.5 billion after the HCV sales improved a bit in the second quarter.

Cory Renauer, writing for The Motley Fool, said, “The upward revision in July made Gilead look uncharacteristically silly when HCV sales fell to just $2.2 billion in the third quarter. That was lower than the $2.5 billion reported in the first quarter and far lower than the $2.9 billion showing in the second quarter. The surprise dip led Gilead to lower the upper end of the full-year HCV sales estimate it had revised upward just three months earlier. The lack of visibility forces biopharma investors to ask themselves, ‘If Gilead’s highly regarded management team can’t predict the effects of increasingly aggressive price competition a few months into the future, how accurate are our long-term predictions?’”

On the positive side, although its HCV franchise appears to be on an unrecoverable downward slide, its HIV franchise is still strong and growing, with potential in its pipeline. In particular, its triple-combo HIV treatment, BIC/FTC/TAF, which is currently being reviewed by the U.S. Food and Drug Administration (FDA), is expected to be approved by Feb. 12, 2018. And analysts, whose projections may or may not be more accurate than Gilead’s executives’, believe the drug could top $5 billion in annual sales.

It’s also possible that the company will see a boost in its HCV franchise. China’s Food and Drug Administration approved Sovaldi for HCV as part of a combination treatment. It’s Gilead’s first HCV drug approved in what is generally viewed as a huge market.