Gilead Sciences tapped new CEO Daniel O’Day in part because of his cancer expertise. But he’s not planning to lead the company’s oncology ramp-up alone.
The Roche veteran intends to bring on a CEO for Gilead’s Kite unit, responsible for key CAR-T drug Yescarta. The new chief will report to O’Day and operate Kite as a separate business unit, JPMorgan analyst Cory Kasimov wrote in a Thursday note to clients.
Gilead acquired Kite in 2017 for $12 billion as its hepatitis C revenues, once its bread and butter, crashed. But so far, both Yescarta and Novartis’ rival CAR-T player, Kymriah, have struggled, thanks to a mix of reimbursement and manufacturing challenges. Kite underperformed expectations once again in the first quarter, with Yescarta’s $96 million in sales for the period checking in below Wall Street consensus of $105 million.
O’Day doesn’t expect to see that trend continue, though. On Gilead’s earnings conference call, he “proclaimed his confidence in cell therapy, noting that it was a critical element of the company’s long term strategy,” Kasimov wrote.
Getting Gilead’s commercial business in order is just one of O’Days three main priorities as he settles into the CEO role, though. After taking the reins March 1, he decided to zero in on strengthening Gilead’s pipeline, in part through M&A. And he’ll also be making organizational tweaks to “ensure the right people are in the right place,” as Kasimov put it.
Gilead is “continuing to scan the entirety” of the M&A landscape and “acknowledges they will continue to ‘look at late stage pipeline,’” while keeping an eye on the company’s areas of expertise—oncology, HIV and hepatitis B and nonalcoholic steatohepatitis, Jefferies analyst Michael Yee wrote to his own clients. And the Big Biotech will be “accelerating internal” candidates in addition to adding bolt-on buys.
Unsurprisingly, analysts trained their attention on the call to O’Day’s strategy comments, and “there were literally minimal to no questions about financials,” Yee noted. But that doesn’t mean Gilead turned in a bad quarter. On the contrary, the first quarter was “fairly clean,” he wrote, with revenues of $5.28 billion meeting expectations and earnings per share of $1.76 topping forecasts by 15 cents.
New HIV hotshot Biktarvy stole the show on the revenue side, blowing the $648 million consensus prediction out of the water with $793 million in quarterly sales.
In the quarter, “about 80% of Biktarvy revenue came from switches with 25% from dolutegravir-containing regimens in the U.S.,” Kasimov wrote, referencing key combinations from Gilead’s HIV archrival, GlaxoSmithKline.