Gilead's HIV portfolio soars, but is it enough to combat falling HCV sales?

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Gilead's new HIV drug Biktarvy shined in the third quarter but its CAR-T cancer therapy Yescarta is still facing reimbursement hurdles. (Gilead)

Gilead has been under pressure over the last year to prove that its new products to treat HIV and cancer will perform well enough to counteract a faster-than-expected decline of its hepatitis C franchise. The third quarter did produce a glimmer of hope—particularly in HIV—but as is often the case with Gilead, the good news was met with some skepticism about the company’s continued growth prospects.

Gilead reported (download) third-quarter HIV sales of $3.6 billion, up 7% year-over-year thanks to the company’s strong launch of its new med Biktarvy. The drug brought in $386 million, blowing past the average estimate of $289 million as Gilead's entry outsold rival drugs from GlaxoSmithKline.

Leerink analyst Geoffrey Porges said in a note to investors that he sees “encouraging signs of stability” in Gilead’s results, despite the “sobering” overall year-over-year revenue decline of 14%. Total third-quarter revenues of $5.6 billion beat the consensus estimate by 4%, and earnings per share of $1.60 came in 31 cents ahead of expectations.

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HCV sales of $891 million fell in line with expectations, but those projections weren't impressive. They reflected “the 20% decline in patients treated by Gilead’s HCV medicines,” Porges noted. Overall, Gilead’s HCV battering has been worse than expected, because of the combination of a shrinking patient base and competition from the likes of AbbVie’s Mavyret.

“Specifically, we see patient volume declining steadily from its initial peak in most markets, and revenue yield per patient continuing to trend negatively based on decreasing treatment duration and increasing discounting by manufacturers competing for government and commercial contract position,” Porges said.

That means Gilead will need much more than Biktarvy to fill the HCV void, and the outlook for the near-term pipeline is uncertain. Investors have high hopes for the company’s JAK1 inhibitor filgotinib in rheumatoid arthritis, for example. It recently turned in impressive results from a phase 3 trial, and the company expects data from two additional phase 3 studies to be available early next year, said Gilead’s vice president of clinical research, John McHutchison, during its q3 earnings call.

But filgotinib's approval depends on a safety study in men with ulcerative colitis, which the FDA requested based on preclinical data. That means the 2020 launch analysts had been hoping for is far from guaranteed, Porges warned.

RELATED: Gilead, Galapagos’ filgotinib aces first phase 3, suggesting it can compete with AbbVie’s upadacitinib

Meanwhile, expectations for Yescarta, the CAR-T cell therapy to treat lymphoma that Gilead nabbed in its acquisition of Kite Pharma, are high: Wall Street has forecasted 50% sales growth over the next year, Evercore analyst Umer Raffat pointed out during the call. But, he asked, can Gilead really be confident it can produce that kind of growth trajectory?

Yescarta brought in just $75 million in sales during the quarter—falling short of analysts’ expectations by 13%. The product hit reimbursement hurdles shortly after it was approved by the FDA last year, hampering pick-up of the personalized treatment.

CEO John Milligan said during the earnings call that the early adopters of CAR-T have worked out the challenges associated with administering cell therapy, particularly billing hurdles, but that many of the 60 hospitals that are equipped to administer the treatment are still trying to figure out the business model.

“So what we would expect is that as these centers start to treat, as they work out how to build the commercial plans, as they figure out how to get reimbursement for Medicare patients, this will grow over time,” Milligan said. “But it is going to take some time to get the growth rate that we need.”

RELATED: Gilead’s Kite taps Eisai cancer vet Amoroso to lead the charge for CAR-T sales

The earnings call was a bit of a swan song for Milligan, who will be leaving Gilead at the end of the year after a 29-year tenure at the company. His replacement has yet to be named, but Evercore’s Raffat wondered if the board would be setting any specific performance expectations for the new CEO. No, replied Milligan, that’s just not how things are done at Gilead.

Perhaps not, but investors will be watching carefully for signs that the new CEO has a solid plan to get Gilead back on a path to strong growth.