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5 Things Gilead Sciences' Management Just Said That You Need to Know

By Keith Speights - Feb 7, 2018 at 1:23PM

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From potential acquisitions to upcoming catalysts, here's the scoop from Gilead's Q4 earnings call.

Gilead Sciences' (GILD -1.32%) fourth-quarter earnings results, announced on Tuesday, told a familiar story. Hepatitis C virus (HCV) franchise sales continued to decline sharply, dragging down overall revenue and earnings. But total sales for the biotech's HIV drugs increased yet again, and Gilead still generated impressive cash flow.

The company's quarterly earnings conference call, held Tuesday evening, provided more juicy details, as it often does. Here are five things Gilead's management said on the call that you need to know. (All quotes are from The Motley Fool's transcript of the Gilead Sciences fourth-quarter conference call.) 

Man holding chalkboard with "what you need to know" printed on it

Image source: Getty Images.

1. Eager to launch bictegravir/F/TAF

It's not surprising that Gilead CEO John Milligan said the company was "very eager to get bictegravir/F/TAF launched." The biotech shouldn't have to wait long. A decision from the FDA is expected by Monday, Feb. 12. An approval for the HIV combination treatment is highly likely. Gilead CFO Robin Washington said that largely due to the anticipated launch of bictegravir/F/TAF, the company sees itself "as a growth story."

A question was asked in the conference call, however, about the possibility that GlaxoSmithKline (GSK -0.07%) might slash the price of its HIV drugs Tivicay and Triumeq in order to prevent Gilead's new combo from taking away significant market share. Milligan replied that price cuts haven't been an issue in the HIV market in the past, but he acknowledged that Gilead doesn't know what GlaxoSmithKline and its Viiv Healthcare spin-off might do.

2. Lots of uncertainties with 2018 guidance

Gilead provided full-year 2018 revenue guidance of $20 billion to $21 billion. However, there are quite a few variables that make that guidance range at least a little iffy.

Washington said that the company's guidance "is subject to a number of uncertainties." She ticked off a laundry list of factors that could limit 2018 revenue. At the top of the list were accuracy of assumptions about HCV market share, accuracy of estimates for HCV patients starts, and unanticipated pricing pressures from payers and rivals in the HCV market. Washington also mentioned potential headwinds from generic competition for the company's older TDF-based HIV drugs and for pulmonary arterial hypertension drug Letairis. 

3. HCV market dynamics are stabilizing

Although Gilead can't be certain about some of its HCV-related assumptions, Milligan stated that "the market dynamics in HCV are stabilizing." After AbbVie's 2017 launch of Mavyret, Gilead doesn't see new rivals emerging. 

Milligan and Washington said that the company expects HCV patient starts to continue to decline, but more slowly than in the past. Gilead expects that its HCV market share will stabilize by mid-2018. As a result, Milligan said that the company's HCV revenue "should be a more predictable, albeit smaller, piece of [Gilead's] financial story." He added later in the call that "after years of having to be defensive about HCV revenues declining, it's very nice to be on the other side of that and talk about the positive trends going forward."

4. Several potential catalysts on the way

While Gilead stock's performance so far this year is already much better than in 2017, the company has several potential catalysts on the way that could boost its share price even more. The biggest is the expected launch of bictegravir/F/TAF. 

In addition, Gilead expects to report key pipeline updates in 2018. Gilead Chief Scientific Officer Norbert Bischofberger noted that results from a late-stage study evaluating filgotinib in treating rheumatoid arthritis are expected in the second half of this year. A phase 2 study of andecaliximab in combination with Opdivo targeting treatment of gastric cancer should wrap up in the second quarter of 2018. Gilead also anticipates reporting two-year data from the Zuma-1 study for CAR-T drug Yescarta in treating refractory large B-cell lymphoma later this year.

More catalysts should come in 2019. Bischofberger stated that results from a late-stage study of Descovy in preventing HIV are scheduled to be available next year. And highly anticipated results from late-stage studies of ASK1 inhibitor selonsertib in treating non-alcoholic steatohepatitis should also be announced in 2019. If positive, those results will be used for a regulatory filing for the drug.

5. Very interested in gene editing

Gilead acquired Kite Pharma and Cell Design Labs in 2017. Milligan stated that the biotech has "been open about our desire to increase our pipeline through acquisitions and partnerships with other companies." He specifically mentioned gene editing as an area of interest.

In discussing Gilead's efforts in developing cell therapies for treating solid tumors, Bischofberger added that "one thing missing is gene editing." He said that Gilead is "talking to companies" and "will do more collaborative deals in that space." 

Unmistakable optimism

In November, John Milligan predicted that 2018 could be "the beginning of a growth phase" for Gilead. While the biotech's guidance doesn't indicate that Gilead will actually return to revenue or earnings growth this year, there was an unmistakable optimism in management's comments.

Milligan thinks that "most of the overhang of declining HCV revenues" should be removed going forward. He said that will allow Gilead to focus on positives of its TAF-based HIV regimens (including Genvoya and the bictegravir/F/TAF combo) and long-term growth driven by Yescarta, selonsertib, and filgotinib. Gilead hasn't turned things around yet, but it's clear that the biotech's executives thinks it's not a question of if but rather when it will happen.

Keith Speights owns shares of AbbVie and Gilead Sciences. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has a disclosure policy.

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