No, this isn't one of those clickbait articles you've no doubt seen way too many times. Gilead Sciences (NASDAQ:GILD) CEO John Milligan actually did make a prediction about 2018. And it really was stunning, at least considering the context of where the company has been and is right now.
Gilead's revenue continues to plunge, with third-quarter sales dropping more than 13%. Its earnings are still sinking, too: The biotech reported an 18% year-over-year decline in net income in the third quarter. For quite a while, Gilead's management team has stated that they weren't sure when the root cause behind the company's deteriorating numbers, slumping sales for its hepatitis C virus (HCV) franchise, would stabilize.
But when Milligan was asked at the Credit Suisse conference held in Scottsdale, Ariz., on Tuesday if 2018 could be a flattening or stabilizing year, he replied that it could be. What he said in his response was even more surprising -- perhaps even shocking. Milligan thinks that next year could be "the beginning of a growth phase" for Gilead Sciences. What's behind Milligan's optimism?
Smooth sailing ahead in HCV
Believe it or not, Milligan thinks that AbbVie's (NYSE:ABBV) introduction of its new HCV drug, Mavyret, "sets the stage for smoothness to HCV sales for the future." Milligan acknowledged that AbbVie's pricing for its new drug will hurt Gilead in the fourth quarter of 2017 and into next year. So why does he think there will be smooth sailing ahead? For the first time in a long time, Milligan doesn't "see anything on the horizon that will be disruptive" in HCV.
What appears to be shaping up, in Milligan's view, is a one-on-one battle in HCV between AbbVie and Gilead Sciences. He said that most of the HCV drugs have about the same net price now. With pricing roughly at parity, it will come down to which HCV therapy works best for patients. Milligan thinks Epclusa matches up well against all other HCV drugs and in particular will "stack up very well against AbbVie."
Expected launch of the best HIV drug ever
Milligan was asked if Gilead's bictegravir/F/TAF combination was as good as it gets in treating HIV. His response: "Yes." That's a bold statement, considering the tremendous success Gilead has had with its HIV drugs through the years. However, Milligan backed up his confidence by ticking off a list of pluses for the bictegravir/F/TAF combo.
At the top of the list for Milligan was that the combo requires "very few compromises." The bictegravir/F/TAF combo doesn't have worrisome interactions and is, in Milligan's words, "a very forgiving regimen." He thinks the single pill taken once daily with great efficacy and a solid safety profile will prove to be very appealing to both patients and physicians. Milligan predicted that bictegravir/F/TAF will become the "most important product out there" in the HIV market, assuming it wins approval as expected in February.
Growth for Yescarta
Another reason behind Milligan's prediction of 2018 as a year for Gilead to return to growth is the potential for Yescarta. Gilead picked up the chimeric antigen T-cell (CAR-T) therapy with its acquisition of Kite Pharma. However, the prospects for Yescarta next year won't be nearly as important to a possible turnaround for Gilead as stabilization for its HCV franchise and continued success in HIV would be.
Milligan noted that there will be a controlled launch of Yescarta. Sites must be trained on how to use the CAR-T therapy first, and then certified before accepting any patients. There were 13 sites in the first couple of weeks after the FDA approval of Yescarta. Milligan said that there would be more than 70 sites certified to treat patients with Yescarta by this time next year. While Gilead will see some incremental growth from Yescarts in 2018, its CAR-T program acquired from Kite will be more important to the company over the longer term.
Is Milligan right?
Could 2018 really bring the beginning of a return to growth for Gilead Sciences as Milligan predicts? Yes -- but I'd put heavy emphasis on the word "beginning."
I suspect that Milligan's view that the company will begin to see stabilization in the HCV market next year is probably right. However, Gilead will still feel the impact of AbbVie's launch of Mavyret in the early part of 2018. Also, the real key to stabilization depends on patient starts on HCV therapy. While the decline in patient starts in the second half of 2017 has been better than expected, there hasn't been stabilization yet.
Regarding the bictegravir/F/TAF combo, however, I don't doubt at all that Milligan's optimism is well founded. Sure, there will be some cannibalization of Gilead's current HIV products, but this really could be one the biotech's biggest winners ever.
Gilead's shares currently trade at less than 10.5 times expected earnings. Even a hint that earnings growth could be coming back in the second half of 2018 would generate a lot of enthusiasm among investors. The conversation could then turn to Gilead's pipeline, especially its non-alcoholic steatohepatitis candidates, which hold tremendous potential for the future.
If Milligan is right that Gilead will start its return to growth next year, look for its stock to make a big comeback in 2018.