Just when investors had counted Gilead Sciences
Product sales in the third quarter were up a healthy 13% on the back of a 23% increase in sales of HIV drug Atripla. The drug is a combination of Gilead's Truvada and Bristol-Myers Squibb's
The question is: What's Gilead going to do for an encore? Truvada and Atripla will lose patent protection eventually, and the two drugs make up 75% of product sales. Gilead has tried to diversify away from HIV drugs -- it sells heart drugs Letairis and Ranexa -- but clearly, it has not had an appreciable effect.
The solution seems to be a three-pronged approach: Stick with what's working, expand into hepatitis C, and do something useful with all the cash it's generating.
In the stick-with-what's-working category, Gilead has two HIV drugs in the works. It is partnering with Johnson & Johnson
It's also developing a Quad pill that contains four medications all developed by Gilead -- no splitting revenues required. Data from the phase 3 trials testing the Quad are expected in the third and fourth quarters of next year.
On the hepatitis C front, Gilead is behind Merck
Finally, let's not forget that Gilead is throwing off a truckload of cash. Through stock buybacks, the company has reduced its share count by 10% this year and expects to purchase another $3 billion worth the rest of the year if the share price stays down. In addition to propping up its shares, the move is helping give investors a larger share of the earnings; net income was up just 4.7%, but earnings per share jumped 15.3% because of the lower share count.
Even though it's an established drugmaker with growing sales, Gilead is quite dependant on the success of its pipeline. Such is the life of a drugmaker; the encore is always necessary to stay alive.
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