Milligan's shake-up at Gilead seen as reassuring to investors

Gilead Sciences CEO John Milligan
Gilead Sciences CEO John Milligan

It is out with the new and in with the old in a management reorg at Gilead Sciences ($GILD), as John Milligan made his first appointments since taking the top spot at the biotech.

The company has recalled its former head of commercial operations, Kevin Young, to serve as chief operating officer and shown the door to Paul Carter, who has been head of Gilead’s commercial operations for only two years. The moves come shortly after what was seen by analysts as a disappointing Q1 as weaknesses appeared in the company’s hepatitis C drug juggernaut.  

Gilead announced late Tuesday that Young, who was Gilead’s executive VP of commercial operations for a decade before retiring in 2014, will assume responsibility for Gilead’s worldwide commercial organization, and facilities and operations as COO. 

“Kevin’s knowledge of Gilead’s business, all aspects of commercial operations and our therapeutic areas of focus, his commitment to operational excellence, and his leadership capabilities make him an obvious choice for the role of Chief Operating Officer,” Mulligan said in a statement.

In addition, the Foster City, CA-based company named Dr. Martin Silverstein, a former exec at Anthem and former consultant at Boston Consulting Group, as executive vice president of strategy. He will oversee Gilead’s corporate development, commercial planning and alliance management functions. Both will report to Milligen.

So what does it all mean? To Leerink Research analyst Geoffrey Porges, the appointments raise short-term questions but provide long-term reassurance. He noted to investors that “this amounts to an acknowledgement that all was not going well with the critical HCV franchise.”

Porges pointed out it was Young who built up the hep C franchise and led the initial launches that resulted in the phenomenal success of the hep C drugs Harvoni and Sovaldi, which last year turned in revenues of $19.1 billion, up 54%.

But cracks have materialized. In Q1, the company missed analysts’ expectations. Sovaldi and Harvoni brought in $1.28 billion and $3.02 billion in sales, respectively. The Street had predicted $1.37 billion in sales for Sovaldi and $3.13 billion for Harvoni. Deeper discounting to payers as competition heated up in the area was seen as the primary reason for the miss.

So in Young, Porges sees a “steadying hand on the commercial operations at Gilead” that should be reassuring to investors.

In Silverstein, he sees someone with payer experience and some chops with M&A. Silverstein spent 20 months as chief strategy officer at insurance giant Anthem, where he got experience both with how payers see the world and with M&A. Anthem is in the process of buying Cigna.

“Silverstein will soon realize that he faces what are probably two of the biggest challenges in drug industry history--how to forecast and plan the outlook for the company’s HCV franchise, and then where to deploy the company’s prodigious cash flow to secure a future beyond sofosbuvir,” Porges said. Having plotted Anthem’s takeover of its competitor, Porges sees Silverstein as “capable of bringing the same bold acquisition solutions to Gilead’s current strategic dilemmas.”

The moves suggest to Porges that Milligan is making his imprint on the company while showing that he is prepared to act decisively to deal with softening sales in the hep C franchise. Still, the analyst sees the appointments as an indication that Milligan and Gilead have yet to figure out a clear strategy going forward. As Porges told his clients, “Investors who may have been hoping for a near-term stabilization in the collapsing HCV outlook or a brilliant transformational acquisition, seem likely to be disappointed for the immediate future at least.”

- here’s the company announcement

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