Making (good) deals is hard to do, Gilead CEO says, but he's working on it

Gilead CEO John Milligan and his fellow execs shared some clues into the company's dealmaking intentions at a Wednesday conference.

With hep C sales tumbling—and no sure sign of a bottom ahead—management at Gilead has been in the hot seat for quite some time to get a deal done. On Wednesday, CEO John Milligan shared some clues into what might be next for the ailing drugmaker.

When questioned about M&A at the RBC Capital Markets 2017 Healthcare Conference, Milligan said Gilead is interested in strengthening its offerings in oncology, inflammation and nonalcoholic steatohepatitis. CFO Robin Washington said the company is looking to "focus on growth for the top line."

Still, “not every company wants to sell,” Milligan said, and recent deals have taken more than a year to complete. RBC analysts wrote in a follow-up note that they believe big deals are “unlikely;” management is focusing more on a series of partnerships and collaborations to grow the pipeline, they figure.

If the analysts are correct, that would leave out Bristol-Myers Squibb, which this week attracted an investment from activist Carl Icahn. Street rumors had put Gilead among the companies that might try to move in on BMS and its immuno-oncology blockbuster Opdivo.

The new statements from Gilead execs come on the heels of the company’s 2017 guidance announcement, which fell well below expectations—and after it reported hep C sales that continue on a sickening downward slope.

Related: With hep C sales crashing, Gilead CEO Milligan concedes M&A is vital for growth

On Wednesday, Milligan said he doesn’t know when those hep C sales will bottom out. For all of 2016, stalwarts Harvoni and Sovaldi turned in revenues 32% and 24% lower than the previous year, respectively. But the business continues to generate “tremendous margins and cash flow,” Milligan maintains.

So, Gilead’s cash position has left analysts questioning for several quarters what the company might buy. Even back in 2015, Evercore ISI analyst Mark Schoenebaum chanted repeatedly that the biggest question for Gilead is “who you’re going to buy." 

Last July, a year after that call, analysts continued to press Gilead management on the topic.

Related: Worried about the 2016 election, pharma took an M&A break

Since Gilead’s initial launch of sofosbuvir products, the company has experienced increasing competition, first from AbbVie with Viekira Pak and then from Merck with its competitively priced Zepatier. The three companies have jockeyed for formulary position, handing out big discounts that have contributed to Gilead's reversal in hep C.

Another treatment area where Gilead might see strength is HIV, which has been delivering some strong growth. Gilead expects that to continue despite the fact that competitor ViiV Healthcare is “trying to change the treatment paradigm,” Milligan said on Wednesday. It’s “a hard thing to do,” he added, noting that some experts have doubts about the ViiV doublet therapy that just put up some key data.

Related: With two-drug combo data, GSK primes for an HIV market-share steal, but don't count out Gilead

Just this month, GlaxoSmithKline’s ViiV presented data from two phase 3 studies showing that its combo beat the virus down to undetectable levels in 95% of patients after 48 weeks. Gilead, for its part, released positive data on a three-drug regimen that includes an as-yet-unapproved competitor to ViiV's new Tivicay, bictegravir.