Gilead Pill In Hand

Source: Gilead Sciences.

Like the mythical King Midas, it seems that nearly everything Gilead Sciences (NASDAQ:GILD) touches turns to gold -- maybe that's where it gets its ticker symbol. The big biotech has built a juggernaut over the years from its HIV drug lineup. More recently, Gilead's hepatitis C treatments have added billions of dollars in revenue.

So when Gilead jumped into the arena with its first cancer drug, Zydelig, expectations naturally ran high. Some analysts predicted Zydelig could eventually bring in between $1 billion and $2 billion per year. Another example of the King Midas touch? Not yet.

Solid but not spectacular
Gilead won FDA approval for Zydelig in July 2014 as a treatment for three types of blood cancers: relapsed chronic lymphocytic leukemia (CLL), follicular lymphoma, and small lymphocytic lymphoma (SLL). The biotech quickly brought the promising drug to market. Here's how Zydelig has performed so far:

Zydelig Sales

Source: Gilead Sciences SEC filings. 

Those sales results aren't bad, but they're not overly impressive, either. Of course, no one expected Zydelig to skyrocket like Gilead's hepatitis C drugs Sovaldi or Harvoni, both of which became billion-dollar blockbusters within a few months of their respective launches. However, for a drug that some anticipated would reach peak sales of over $1 billion, Zydelig has a long way to go.

A big part of Zydelig's challenge is competition from Imbruvica. The rival drug generated sales of $247 million in the first quarter this year after gaining its first FDA approval (for mantle cell lymphoma) in November 2013. Imbruvica subsequently won regulatory approval for CLL in February 2014 and rare blood cancer Waldenström's macroglobulinemia in January 2015. 

Imbruvica claims two key advantages over Zydelig. First, it doesn't carry a black box warning. Zydelig's black box warning, on the other hand, looks scary with its references to multiple "fatal and serious toxicities."Second, Imbruvica is less expensive than the total cost of treatment with Zydelig, which has to be taken along with Rituxan.

Still early
While Zydelig's sales haven't blown anyone away, it is still early. And there could be more indications on the way.

Gilead has three clinical trials for Zydelig in progress. Two of them are late-stage studies -- one focusing on frontline and relapsed refractory CLL and the other relapsed refractory indolent non-Hodgkin's lymphoma (iNHL). The other study is in phase 2 and targets frontline iNHL. 

More clinical trials could be forthcoming. Gilead inked an agreement with AstraZeneca earlier this year to explore how AstraZeneca's checkpoint inhibitor works alongside Zydelig in treating breast cancer. Gilead also plans to begin an early-stage clinical trial later this year of JAK1/JAK2 inhibitor momelotinib combined with Zydelig in treating solid tumors. 

All that is gold doesn't glitter
At this point, Zydelig's chances of reaching that magical $1 billion mark for annual sales appear to be in doubt. Some analysts now think that the drug will hit peak sales of $835 million by 2020. Has Gilead lost its Midas touch? Not really.

It's important to note that Gilead gained rights to Zydelig with its acquisition of Calistoga Pharmaceuticals back in 2011 for $375 million. The deal also included up to another $225 million in milestone payments. Even if Zydelig "disappoints" with peak sales topping $800 million, the return on investment for Gilead won't be bad at all. 

Focusing only on Zydelig also misses the big picture. Gilead is steadily forging ahead in the oncology market. Zydelig is the biotech's first cancer drug, but it won't be its last. I suspect that Gilead will keep on turning drugs gained through its acquisitions into gold. Some just might glitter more than others.

Keith Speights owns shares of Gilead Sciences. The Motley Fool recommends Gilead Sciences. The Motley Fool owns shares of Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.