In 2017, Gilead says hepatitis C drug sales will shrink to $7.5 billion to $9 billion, from $14.8 billion in 2016. And in 2018, hepatitis C sales will likely fall farther.
The hepatitis C situation is completely different from Gilead's astounding and continued success in HIV. Once universally fatal, HIV has been defanged by highly effective antiviral therapies that keeps the virus suppressed -- as long as patients take their medicine. There is no cure for HIV, but the disease is now managed by chronic, daily therapy.
Every HIV patient prescribed a Gilead pill is like an annuity to the company. The revenue stream is continuous. It doesn't end, unless a patient switches to a competing medicine, or patents expire. But even then, Gilead continues to develop new, better HIV medicines.
HIV is maybe the best biopharma business ever invented. And Gilead dominates.
Gilead has no regrets about getting into the hepatitis C business. Curing disease should always be a goal for the biopharma industry. Where Gilead fell short was failing to plan for the downside to its hepatitis C business. Maybe Gilead believed hepatitis C sales would be more sustainable than they turned out to be. Or, maybe Gilead believed, mistakenly, that its internal drug research pipeline would make up for falling hepatitis C sales. Maybe Gilead was too cautious, too conservative, when considering external acquisition candidates.
No one will ever accuse Gilead of being run by a bunch of dopes. Milligan and his team are really smart people. Therefore, the company's current predicament is a warning to the rest of the biopharma industry that as much thought needs to go into selling cures as developing them. There is an economic disincentive to curing disease if the business model doesn't work.
Are you listening, gene therapy companies?