How bad is Gilead Sciences (GILD) these days? So bad that analysts, scrambling for something encouraging to say after another quarter of disappointing earnings, praised the company for not cutting sales guidance again.
Gilead is a great biotech company. Its drugs helped transform HIV from a fatal epidemic into a chronic, manageable and survivable disease. For an encore, Gilead cured hepatitis C for almost every patient that can swallow a daily pill for three months. Patients benefited. Shareholders profited.
But greatness doesn't last forever. Gilead is experiencing a stretch of awfulness right now that I can only describe as depressing. The company's current performance almost physically hurts.
Third-quarter earnings reported Tuesday night were a retread of the same frustrating script. Hepatitis C sales falling 31% due to competitive pressures and lower net pricing. Sales of new HIV drugs strong, up 21%, but not enough to make up the difference. A mediocre drug research pipeline. No M&A. No clear plan for a return to growth.
I want the old Gilead back!
The present Gilead, with a stock down 27% for the year, trading at levels not seen since April 2014, is too sad to bear. The Gilead we all love would never trade at a rock-bottom six times forward earnings, yet there it sits.
So, what can be done to restore Gilead's luster? Like most people, I thought an aggressive acquisition strategy was the answer. The two greatest periods of sustained growth in Gilead's history were triggered by acquisitions -- Triangle Pharmaceuticals in 2003 (HIV) and Pharmasset in 2011 (hepatitis C.)
How hard could it be for Gilead to just do it again? Gilead has $31 billion in cash on hand and free cash flow exceeds $4 billion each quarter, even with lower sales.
Very hard, it seems. On Tuesday's conference call, Gilead CEO John Milligan sounded flummoxed. While the company remains "open minded" and "very active" on the M&A front, Milligan conceded that some of the assets they were looking at were too early, while others were too expensive. Gilead won't stray from its "disciplined" M&A standards just because everyone outside the company is urging them to get a deal, or a series of deals, done, said Milligan.
And so we wait.
Waiting for Gilead. Existential dread.