Gilead Sciences (NASDAQ:GILD) needed some good news.
The big biotech's latest quarterly update, announced last week, didn't convince investors that things were again looking up. Gilead continues to reel from sinking hepatitis C virus (HCV) franchise sales. However, good news came just one day after the company's dismal fourth-quarter results. The U.S. Food and Drug Administration (FDA) approved Gilead's new HIV drug, a combination of bictegravir, emtricitabine, and tenofovir alafenamide.
Just how significant is this latest FDA approval for Gilead? Huge. But is it huge enough by itself to reverse the biotech's fortunes?
Greatest of all time
Gilead Sciences' name is synonymous with treating HIV. The company has launched a string of powerful HIV drugs, from Viread in the early 2000s to current blockbusters Genvoya and Truvada. But the biotech's latest HIV drug could be the greatest of all time.
I don't think Gilead's name for the drug -- Biktarvy -- is that great, though. It doesn't have the pizzazz that that the company's past products, for either HIV or hepatitis C, have had. Biktarvy sounds like more a disease than a treatment for a disease, in my opinion. However, that's about the only negative I can think of for the drug.
When asked in November if the drug soon-to-be-named Biktarvy was as good as it gets in treating HIV, Gilead CEO John Milligan simply replied, "Yes." Milligan predicted that the drug would become "the most important product out there" in the HIV space. Gilead executives even referred to Biktarvy as the company's "Mount Everest."
Biktarvy is the fourth HIV drug that Gilead has launched based on tenofovir alafenamide (TAF), following Genvoya, Odefsey, and Descovy. Another TAF-based drug, Vemlidy, won approval in 2016 for treating hepatitis B virus (HBV).
Market research firm EvaluatePharma thinks that Biktarvy will be the biggest new drug launch of 2018, ahead of some highly promising other new drugs on the way. Biktarvy is projected to generate sales of more than $5 billion by 2022. By comparison, Genvoya, which Gilead has said produced the fastest sales growth of any HIV drug in history, made $3.7 billion last year.
The bigger picture
There's no question that approval for Biktarvy is great news for Gilead. No one doubts that the drug will become a huge success for the biotech. However, there are some other factors to consider.
First, Viiv Healthcare, which is majority-owned by GlaxoSmithKline (NYSE:GSK), isn't going to easily give up market share for its HIV drugs. Soon after the FDA approved Biktarvy, Viiv filed a lawsuit claiming that Gilead had infringed on patents for dolutegravir, a component in Viiv's blockbuster HIV drugs Tivicay Triumeq. There's also the possibility that Viiv could fight Biktarvy by lowering pricing of its drugs.
Second, Biktarvy will cannibalize sales of some of Gilead's other HIV drugs to some extent. Gilead has already seen this effect with the launches of its other TAF-based therapies. Sales for the company's former top HIV drug, Truvada, fell 12% year over year in 2017, while sales for Atripla dropped nearly 31% year over year. Some of these declines were attributable to competition from Viiv, but some market share also went to Gilead's newer HIV drugs.
Gilead projects that total HIV and HBV revenue will increase between $1.2 billion and $1.5 billion in 2018. That more than offsets the expected decline of $800 million to $900 million resulting from patent expiration in Europe for Truvada and Viread. However, the overall gain in HIV sales boosted by the launch of Biktarvy won't be nearly enough to make up for continued sales declines for Gilead's HCV drugs.
More good news needed
The bottom line for Gilead is that more good news is still needed. While many investors cheered the company's acquisition last year of Kite Pharma, it will take some time before Kite's CAR-T therapies become a significant revenue source for Gilead. And while Gilead's pipeline includes several promising candidates, it's also going to be a while before any of them reach the market.
CFO Robin Washington said in the company's fourth-quarter earnings call that Gilead sees itself as a "growth story" in large part due to the expected success for Biktarvy. However, as tremendous of a drug that Biktarvy is likely to be, it's not enough to return Gilead to growth.
HCV sales could stabilize in the not-too-distant future, though. John Milligan thinks that "the market dynamics in HCV are stabilizing." Also, Gilead could potentially make another acquisition that could excite investors. The biotech needs more good news, but it could have some on the way.