Gilead Sciences (GILD -1.46%) is in a slump. Over the past three years, the biotech's stock has lost over 35% of its value, thanks to falling hepatitis C sales, generic competition entering the HIV market in key geographies, and a slate of setbacks in hematology/oncology. 

To break out of this prolonged downturn, Gilead presently is undergoing a dramatic leadership overhaul -- highlighted by the the upcoming departure of current CEO John Milligan by year-end. Will this executive turnover enable Gilead to reverse course? Let's take a deeper look and consider how this top biotech might evolve over the next five years under new leadership.

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Value drivers and obstacles

As things stand now, Gilead is attempting to reinvigorate its growth engine through three key therapeutic markets: hematology/oncology, inflammatory disorders, and nonalcoholic steatohepatitis (NASH). While all three of these therapeutic areas are absolutely enormous in terms of their respective commercial opportunities, Gilead lacks a clear competitive advantage in each case. 

In hematology, Gilead burst onto the scene roughly a year ago by paying a whopping $11.9 billion for Kite Pharma and its adoptive cell therapy Yescarta. Although Gilead reported a respectable $75 million in Yescarta sales for the third quarter of 2018, this franchise already is facing a slew of competitive threats.

Atara Biotherapeutics, Celgene, Crispr Therapeutics, Johnson & Johnson, Pfizer, and numerous others all are developing next-generation adoptive cell therapies that likely will eclipse Yescarta in terms of safety and efficacy. Gilead has been working to shore up its Kite investment with additional acquisitions, but there's a growing chance that this sizable investment won't produce a healthy return on capital over the long run. And this harsh reality is probably one of the major drivers behind Gilead's ongoing executive exodus.   

On the inflammation front, Gilead and partner Galapagos are angling to grab market share away from AbbVie (ABBV 0.13%) and Pfizer with their experimental JAK1 inhibitor, filgotinib. But this strategy also has obvious problems.

First and foremost, AbbVie decided to hand back the development rights to filgotinib to Galapagos in favor of its own internal candidate, upadacitinib (ABT-494). Since then, filgotinib has produced some truly compelling midstage data that suggests that it might be a safer option than upadacitinib. But AbbVie is likely to grab an all-important first-mover advantage for upadacitinib.

AbbVie also is far more familiar with the anti-inflammatory market than Gilead, which has been proven by the biotech's ability to repel nearly every major competitive threat to its flagship arthritis medication Humira for a sustained period of time. In short, Gilead has its work cut out for it when it comes to promoting filgotinib and challenging entrenched competitors like AbbVie and Pfizer. 

Lastly, Gilead is advancing three different compounds in the clinic for NASH. The lowdown is that the NASH space is expected to be the next big thing in biopharma, and Gilead is hoping to be a top player in this potentially $35 billion-a-year market.

Unfortunately, the biotech's NASH pipeline doesn't appear to stack up well to the leaders in the field, namely Intercept Pharmaceuticals (ICPT), Madrigal Pharmaceuticals (MDGL 3.46%), and Viking Therapeutics (VKTX 2.56%). Intercept is poised to become the first to market with its drug Ocaliva, and Madrigal and Viking stand an excellent shot at eventually developing the most potent/safest NASH therapies overall. 

What's next?

Gilead is presently a cash cow with a middling-to-lower-tier clinical pipeline. As such, the next CEO's first priority is probably going to be to add some star power to the biotech's clinical lineup. 

The good news is that the next person to take Gilead's top job will have a mountain of cash to work with in order to accomplish this feat (more than $30 billion). Moreover, this is a target rich mergers and acquisitions environment. In NASH alone, Gilead could gobble up Intercept, Madrigal, and Viking to build out a formidable competitive position -- and still have billions left over to tack on additional assets in hematology.

Gilead's best chance at righting the ship in the next five years is unquestionably NASH. After all, NASH has a more favorable competitive landscape than hematology, more reasonably priced acquisition targets, and a wide-open commercial opportunity that might even rival blood cancer at some point down the road.

That being said, it's obviously impossible to know exactly where this biotech is headed until a new CEO is named, and Gilead may choose to double down on hematology due to its massive investment in adoptive cell therapy. The path of least resistance, though, seems to indicate that Gilead is headed toward building an economic moat in NASH -- a move that would be cemented by hiring a CEO with experience in this novel therapeutic area.