Image source: Getty Images.

Gilead Sciences (GILD -0.21%) hasn't exactly had the best 2016. Shares of the biotech are down about 20% year to date as sales of its hepatitis C drugs slumped from pricing pressure, and as doctors have worked through the initial bolus of hepatitis C patients waiting for a new therapy.

While hepatitis C drug sales were down 19% year over year in the second quarter, overall sales fell just 6% thanks to a 15% boost in sales of its HIV and other antiviral drugs.

Unlike hepatitis C drugs, which are a cure, HIV drugs generally need to be taken for a patient's entire lifetime. Rather than needing a constant addition of new patients to replace the cured ones, like Gilead requires just to maintain its hepatitis C franchise, sales of HIV drugs can build on previous quarter's sales with just a fraction of patients needing to be replaced.

New products

Gilead's HIV sales have grown thanks to the launch of new drugs.


FDA Approval Date

Sales Q2 2016


Nov. 5, 2015

$302 million


March 1, 2016

$58 million


April 4, 2016

$61 million

Data source: Gilead Sciences.

Getting three drugs approved in four months might seem like an amazing feet, but Genvoya, Odefsey, and Descovy are all drug cocktails that just contain one new drug -- the same drug in each: tenofovir alafenamide (TAF).

And in each cocktail, TAF is just a substitution for a related drug, tenofovir disoproxil fumarate (TDF). Once Gilead was able to show that one combination containing TAF worked just as well as the older cocktail containing TDF, it stood to reason that the other cocktails would follow suit.

TAF has two main advantages over TDF. It appears to be safer, with fewer kidney and bone issues, which is what's driving sales now. Many sales are probably switches from the TDF-containing versions, which doesn't help Gilead all that much, but the safer version should also convince some doctors to start newly diagnosed patients on TAF-containing medications rather than competitors.

TAF is also more potent, so it takes up a smaller volume of the pill, which could allow for single-pill regimens combining TAF and other drugs, where TDF would make the pill too large to be swallowed comfortably. Gilead, for instance, is working with Johnson & Johnson (JNJ 0.23%) to combine TAF and a couple of other Gilead drugs with Johnson & Johnson's Prezista in a single pill. Johnson & Johnson's Prezista is currently approved to be taken with another drug, Norvir, but the two pills have to be taken separately, which isn't as convenient.

New indication

In addition to the TAF-containing drugs, Gilead's HIV franchise is benefiting from increased sales of Truvada as a pre-exposure prophylaxis (PrEP) to reduce the risk of HIV infection in people who are likely to be exposed to the virus. U.S. sales of Truvada were up 26% year over year in the second quarter.

Last month, the European Commission approved Truvada for PrEP, so Gilead should start to see a boost in Truvada sales across the pond. It usually takes a few months to set up reimbursement in many European countries. It'll be interesting to see if counties with single-payer systems, such as the United Kingdom, feel the cost is worth the benefit of reduced HIV infections.

Looking forward

With Gilead's hepatitis C drugs making up just over half of total product sales, double-digit declines -- for however long they last -- will have detrimental effects on overall sales that gains in sales of Gilead's HIV drug franchise may not be able to fully keep up with. At some point, though, the year-over-year comparisons for hepatitis C drugs won't be too bad, and hopefully the HIV drugs will still be giving Gilead a boost at that point.

The biggest win in 2017, though, could come from an acquisition by Gilead Sciences. The company ended June with more than $24 billion in the bank and recently raised another $5 billion in a debt offering. A smart acquisition could help spur sales growth, deadening the blow from declining hepatitis C drug sales.