Will Gilead Sciences Continue To Soar

After manufacturing the drug for the treatment of Hepatitis C; Gilead Sciences Inc. became stronger than before. The two drugs –Sovaldi and Harvoni are the most successful drugs launched by the company. Also, its hefty price tag ensures greater returns to the company. Apart from soaring revenues, the prestigious credit of discovering the cure for a disease, which remains untreated in more than half of a patient also goes to the drug maker.

Keeping in view, the success rate of the newly invented drugs, the analysts anticipate that on Tuesday, February 2, 2016 when the company will reveal its quarterly earnings, the company is expected to post revenue of $32 billion and net profit of $17 billion. Before the ground breaking launch of the drugs, in the year 2013, it managed to generate the revenue of $11 billion and net profit of $3 billion.

However, the analysts are skeptical about the success span of the $120 billion organization. Harvoni treatment takes about 8 weeks and the full cost of the treatment accumulates to $94,500 while Sovaldi 12-week treatment accumulates to a total of $84,000. Analysts concern that over a period, the number of patients qualifying for the treatments will be less and less. Therefore, will the company be able to generate high revenue and profit?

Currently, the Foster City, Calif. firm valued higher than the pharma giants including Bristol-Myers Squibb, GlaxoSmithKline, and Astra Zeneca. However, there is not a lot in the future for the company in terms of drug inventions and discoveries. Gilead’s executive vice president, Paul Carter acknowledges the external pressure that has been put by the investors and the analyst on the company. He said that the both the parties are keen to find out what will keep the company on the track of revenue growth and high profits. He said: “We’ve got really rich pipeline, but there’s actually not another drug that’s going to give us tomorrow morning another $3 billion to $5 billion [in annual sales].”

Last month, some news hinted a potential blow for the company. Firstly, international developer, distributor, and manufacturer Merck announced that it is going to offer its new Hepatitis C drug at a steep discount. Secondly, just after few hours, company’s CEO John Martin stepped down from his position.

To add to the fuel, the company has reportedly under a lot of pressure to lower its HCV drug prices. Last month, Massachusetts attorney threatened it to file a suit against it over the unfair trade practices. However, company persisted that its drug is cheaper than the alternative treatments including liver transplant. The protests against hefty price have sprawled across the world. Lately, Kiwis also protested against the enormous price tag of a life-saving drug.

All is not bad for the company. It has recently closed a deal with a Belgian-based company Galapagos for the manufacturing and distribution of an essential drug for curing rheumatoid arthritis –filgotinib. It also has a favorable cash position to buy smaller biotech group with a potential blockbuster medicine. Mr. Carter expressed his views that the company has a lot of potential to perform better. The company’s strategy is to think prudently and not to take haste decisions.

At the market which closed on Friday, Gilead Sciences stock stood at $82.7.