Can Gilead Sciences pull another rabbit out of the M&A hat?
The biotech became a Wall Street darling thanks to an $11 billion deal that landed the blockbuster Sovaldi and Harvoni hepatitis C treatments, but the drugs are no longer delivering the same revenue growth that have excited investors.
On Monday, Gilead reported that second-quarter sales of $7.7 billion fell short of analyst expectations. This was the second consecutive quarter that disappointed. The company also modestly cut its revenue forecast for the year by $500 million. The news sent Gilead stock down nearly 8.5 percent today.
What’s the problem with the hepatitis C drugs?
Overall, sales were $3.92 billion, a 19 percent decline. And in the United States, they fell 33 percent, thanks to fewer new patients, higher rebates given to payers, and lower revenue per patient as the mix of payers shifted toward Medicaid and the US Department of Veteran’s Affairs, which typically receive lower prices than commercial health plans. In Europe, there were also fewer new patients and a higher mix of patients in countries where Gilead faces tougher price controls.
So what do analysts foresee? Here is what some of the Wall Street wags had to say:
“While management pointed to increasing screening volumes and confirmed its prior estimate of about 1.5 million people in the US who are yet to be diagnosed, it also anticipates a gradual decline in new patient-starts going forward, especially in mature markets such as the US, Germany, and France,” wrote Deutsche Bank analyst Gregg Gilbert in an investor note.
Needham analyst Alan Carr, meanwhile, wrote that, “although there have been improvements in US diagnosis rates — 280,000 new patients in 2014 and 2015 — these patients often have less severe disease, may not be treated immediately, and require shorter treatment durations. We expect variability in (the number of patients) treated per quarter, but assume downward pressure on revenue will continue.” …Read More>>
Source: STAT
