After market close today, Gilead reported Q1 2016 results — and its flagship Hep C cure franchise showed the corrosive effects (on reported — i.e., post discounted sales revenue) that the entry of a low-priced competitor — like Merck (as of January 2016) engenders. [Backgrounder, here.]
Were I a betting man, I wouldn’t expect that all of Gilead’s loss will become Merck’s gain. That is not how price cutting in the pharmaceuticals markets works out. Merck too is likely discounting off of its list price, and so too palinly is AbbVie. All of them could see some flagging — due to the move. But in truth, a price cut was Kenilworth’s only real play to get some form of toe-hold, in what had been Gilead’s pretty much air-tight space, for at least six quarters running. Here’s The Wall Street Journal reporting tonight, on it all:
. . . .In the first quarter, Gilead said sales of Harvoni, its newer treatment, fell 16% to $3.02 billion. Analysts were looking for $3.15 billion, according to FactSet. Meanwhile, Sovaldi sales jumped 31%, to $1.27 billion, but the increase fell short of expectations amid soft European markets. Analysts had projected a 34% rise in Sovaldi sales to $1.30 billion.
Gilead is facing growing competition in the booming hepatitis space. During the quarter, pharmaceutical giant Merck & Co. launched a new treatment that costs 30% less than rival drugs and comes in the form of a once-daily pill. Meanwhile, AbbVie Inc. markets Viekira Pak, a competing and similarly costly treatment it launched in late 2014. Gilead has managed to protect much of its market share, but analysts have cautioned that pressure is heating up. “People are worried about the hepatitis C market,” said RBC analyst Michael Yoon. “Prices have gone down [and] there’s increased competition,” he said. . . .
As ever, we will let you know whether this Gilead overall revenue miss was “a canary in the coal mine,” as to Merck’s Q1 2016, at least in the in Hep C space — as well. But Merck should show pretty robust growth in the immuno-oncology space — even as it trails BMS, in second, there. That is still a huge pile of reveune, rolling in. As are all of these franchises, in truth. And so. . . Onward.