Gilead Sciences (NASDAQ:GILD) put up a rather lackluster third-quarter report last week. Revenue was flat year over year, dragged down by a 20% decline in sales of its hepatitis C franchise, as well as lower sales of angina drug Ranexa and pulmonary arterial hypertension drug Letairis as both drugs face generic competition.

But management at the big biotech still has high hopes of turning things around with its newer medications.

Yescarta: Short-term issues, long-term winner?

CFO Robin Washington talked about the company's CAR T drug, Yescarta, which Gilead acquired in a 2017 deal with Kite Pharma:

It is clear that cell therapy is a validated platform with hundreds of patients being treated on a quarterly basis in the US. Yescarta has established itself as a differentiated leader in an increasingly competitive environment. We will continue to focus our efforts on CAR T education in the community oncology setting to stimulate referrals of appropriate patients to cell therapy treatment centers.

We also observe CAR T eligible patients being enrolled in clinical trials at a much higher rate relative to commercial patients. As such, and as [CEO Daniel O'Day] outlined, we anticipate further quarterly sales variations, but remain very confident in the future trajectory of Yescarta.

Basically, Yescarta has captured the low-hanging fruit in doctors at research institutions that are likely to quickly adopt new technology, and Gilead has moved into community oncologists, who take longer to convert and are more spread out.

Unfortunately, Gliead has no control over the second headwind: competition with clinical trials. The best solution is to move into earlier-stage patients where there are fewer therapies being tested, but that'll take time to gain regulatory approvals for earlier-stage patients.

Female doctor talking to a male patient in an exam room.

Image source: Getty Images.

Switching

Gilead has done well switching HIV patients from tenofovir disoproxil fumarate (TDF)-containing regimens to those that contain tenofovir alafenamide fumarate (TAF), a related molecule that has fewer side effects. The switching -- and capturing of new patients -- drove HIV sales 13% higher during the third quarter, which helped keep overall revenue flat year over year.

Gilead's newest TAF-containing offering, Descovy, was approved by the Food and Drug Administration as a pre-exposure prophylaxis (PrEP) to try and prevent HIV infection.

Chief Commercial Officer Johanna Mercier laid out the plan to convince doctors to switch patients from TDF-containing Truvada to Descovy and the challenges of switching patients at risk for HIV infection compared to the smaller population of patients being treated for HIV:

The PrEP market is a little bit different than the treatment market and that it is much larger in the number of prescribers. So, there's over 50,000 prescribers that have actually written at least one script of PrEP with Truvada. So having said that, more than half of the volume that we're seeing in PrEP is actually very concentrated in a couple of thousand specialists who also prescribe in treatment. So that has been our number one focus and target physicians that we have been calling on over the last couple of weeks because these are folks that obviously largest volume pool, but also folks that have experienced converting from TDF to TAF and also understand the value of Descovy and its clinical profile specifically around the safety with bone and renal.

High hopes for a pipeline candidate

Mercier also talked about Janus kinase (JAK) inhibitor filgotinib, which is under review by regulators in the EU and Japan and will be submitted to the FDA by the end of the year as a treatment for rheumatoid arthritis. The drug faces competition from already-approved JAK inhibitors, Eli Lilly's (NYSE:LLY) Olumiant, Pfizer's (NYSE:PFE) Xeljanz, and AbbVie's (NYSE:ABBV) Rinvoq, but Mercier thinks filgotinib could have an edge:

One of the things that I would say is the importance of our data and I think that if you look at the results of the three FINCH 3 studies in three different patient groups, those are really exciting for us, both from an efficacy standpoint as well as safety standpoint.

So a lot of the work that's being done right now is sub-analysis to ensure that we can better educate physicians about our data. So that's kind of the plan there. And I do think that the opportunity here is to potentially have a best-in-class JAK inhibitor in that could be also related to the sole activity of the JAK1.

While Olumiant and Xeljanz target multiple members of the JAK family, filgotinib is selective for JAK1, which could give it an edge. Unfortunately, Gilead will still have to compete with Rinvoq, which also targets JAK1 selectively.

Biggest opportunity?

Of the three, Descovy offers the biggest near-term upside. Yescarta faces some near-term issues, but the drug -- and the rest of CAR T pipeline -- should help expand Gilead's sales in the future. Filgotinib is a bit of a wild card; rheumatoid arthritis is a big opportunity, but the drug faces stiff competition from other JAK inhibitors, as well as other established rheumatoid arthritis drugs in other classes.