|Gilead CEO John Martin|
10. Gilead Sciences ($GILD)
2014 revenue: $24.474 billion
2013 revenue: $10.804 billion
Gilead threw up the kinds of revenue percentage growth numbers last year one might only expect from a new biotech with a hot property, growing 126.5% in 12 short months. That was achieved on the back of the incredible success of its hepatitis C drug Sovaldi, with combo treatment Harvoni providing a bit of Q4 punch. Those two drugs accounted for more half of Gilead's revenues, $12.4 billion and essentially all of the growth.
That was a one-year phenomenon, of course, since last year Gilead was comparing its pre-Sovaldi life to what happened after its launch in December 2013. Gilead has already cautioned investors that this year's revenues will be only a bit higher--somewhere in the range of $26 billion to $27 billion--short by about $2 billion of what analysts expected.
Gilead is known for sandbagging its estimates, but something else is at play that put investors on notice. That is the discounting the drugmaker says it expects this year, given that payers are putting up a lot of resistance to Sovaldi's high price, both in the U.S. and abroad. Express Scripts ($ESRX) forced a pricing war by striking an exclusive deal with AbbVie ($ABBV) for its competing treatment Viekira Pak as soon as the FDA approved it late last year. Gilead responded with a series of special tie-ups of its own with insurers and payers, but the moves have resulted in even more discounting. In fact, Gilead says that its hep C gross-to-net adjustments--the difference between upfront pricing and sales after rebates--will run 46% this year. That is more than twice the 22% it averaged last year.
Gilead defended the high price of its hep C treatments--$94,500 for Harvoni and $85,000 for Sovaldi--by pointing out that its cure rate of 90% or more will help avoid costly hospitalizations and complications leading to liver transplants. The bigger question for Gilead is how much growth is there over the long haul for treatments that cure hepatitis? One of the forces at play when it launched was all of the pent-up demand for an all-oral, interferon-free treatment. Many doctors had held patients off of other treatments just awaiting the approvals of Sovaldi and Harvoni.
Gilead Chief Operating Officer John Milligan recently tried to put investors at ease about that. He said it should take 6 years to treat all of the estimated 1.6 million hep patients diagnosed in the U.S. "On top of that, about an equal number need to be diagnosed," he said at an investor conference. "So it plays out over a much longer period of time."
-- Eric Palmer (email | Twitter)
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