Last year, Gilead Sciences (GILD -0.21%) managed a feat that very few of its peers ever have (or probably ever will): It shed a staggering $40 billion in value without a single top-selling drug going off patent. 

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In fact, the biotech actually launched multiple new products last year, such as the HIV meds Odefsey and Descovy, along with the latest addition to its hepatitis C franchise, Epclusa. 

So how did a top dog like Gilead sputter so badly? Although several factors played a role in the biotech's dreadful 2016, Gilead's problems can ultimately be traced back to one strategic move. 

Gilead's refusal to buy revenue growth wreaked havoc on its share price in 2016

If you've been following this stock for any length of time, you're probably painfully aware that Gilead's hep C franchise sank like a stone last year. The short version of the story is that the biotech's super-aggressive pricing strategy for Sovaldi and Harvoni sowed discontent among payers, leading to a pricing war once rival drugs like AbbVie's (ABBV 0.75%) Viekira Pak hit the market.

While Viekira Pak has so far been unable to make much of a dent in Gilead's overwhelming market share, AbbVie's drug did give payers the leverage necessary to force the biotech to offer substantial rebates for its hep C drugs. As a result, Gilead's hep C revenue fell by more than 18% over the course of the first nine months of 2016. 

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Drug companies facing a double-digit decline in revenue for a cornerstone franchise are normally willing to open up their coffers to start buying revenue-generating peers. Gilead, however, decided to plow an enormous $10 billion into stock repurchases, and that figure may rise even higher once the biotech reports its Q4 numbers. 

Gilead's stated reason for shying away from buying revenue is that biotech valuations are simply too rich -- making it hard to find suitable targets. However, that hasn't stopped Gilead's peers like AbbVie from getting ahead of any potential dips in revenue by pursuing pricey acquisitions.

And, if anything, biotech valuations are far more reasonable now than they have been in a while due to the pullback sparked by the leadup to the U.S. presidential election. Nevertheless, the biotech's management has refused to entertain a growth-by-acquisition strategy, despite the company's clinical pipeline also experiencing a number of major setbacks last year. 

Investor takeaway

The point is that the market doesn't care about how much cash you have on your balance sheet -- or even how much debt, apparently. AbbVie's balance sheet, for instance, is leveraged through the roof, and its stock performed admirably in 2016 due to its ability to continue growing its revenue. Put simply, all the market cares about is top-line growth, and that's where Gilead failed its shareholders last year -- at least in the short term.

Looking ahead, if this top biotech isn't willing to change course and start engaging in mergers and acquisitions tout suite -- regardless of biotech valuations -- investors are probably best served by looking elsewhere for more compelling opportunities in 2017. Gilead's hep C revenue, after all, is only going to continue its southward march from here on out. Patient investors may eventually be rewarded, but there's no telling how long it'll be.