Gilead (GILD) Hungry For Oncology M&A, Bullish On Hep C Cash Flow: 2/12/2015 1:49:31 PM By Riley McDermid, BioSpace.com Breaking News Sr. Editor Biotech darling Gilead Sciences, Inc. (GILD) is continuing its charm offensive this week, on Wednesday sending Chief Operating Officer John Milligan and Vice President of Investor Relations Patrick O'Brien to lunch with analysts at Citigroup, who came away upbeat about the controversial firm's business structure and convinced it will soon be attempting more mergers and acquisitions. "We came out bullish that Sovaldi/Harvoni's volume will increase in U.S. and Europe in 2015 driven by increased rebates to public segments. Gilead's pipeline is also advancing and Simtuzumab should have interim 48 week data in late 2015 in NASH," wrote biotech head analyst Yaron Werber in a note to investors. Despite telling the BIO CEO and Investor Forum this week that Gilead "feels no urgency for mergers/acquisitions, but if we did, it would be thoughtful and reflective," Milligan's time with Citi left analysts feeling the company is hungry for new deals, particularly in oncology. "We detect that management is definitely gearing up the company to be very active on M&A in 2015 and oncology will likely be a key focus," wrote Werber. "We do not anticipate one sizable deal that will have an imminent change but instead see a few smaller deals to bolster the pipeline for the mid-term." Gilead's team also remains convinced profits will stay high, just months after Gilead Sciences, Inc. (GILD) sold $10.3 billion of its new hepatitis C drug Sovaldi in 2014. Sovaldi sells for approximately $1,000 per pill, while its sister medication, also from Gilead, Harvoni, sold about $2.1 billion in 2014. Similar competitor AbbVie (ABBV)'s HCV medication Humira recorded $12.5 billion in sales and is now gaining on the coattails of AbbVie's new hepatitis C treatment, Viekira Pak. Both Sovaldi and Harvoni have treatment rates close to 90 percent, making them essentially a cure for many patients—success several companies are attempting to duplicate soon, posited analysts. Both Sovaldi and Harvoni have treatment rates close to 90 percent, making them essentially a cure for many patients—success several companies are attempting to duplicate soon, posited analysts. "Management is also confident of the sustainability of hepatitis C cash flow for the next decade based on the rate of patients being treated, continuing innovation, and focus on eradication of disease," said Werber. "Hence management is very confident in its ability to do stock buybacks, provide a dividend, and do M&A. But the meeting also noted that there is little visibility as to how fast the public hepatitis C segment will grow, where treatment volumes will grow to, and where pricing will be as the market will get more competitive." Milligan estimated at BIO earlier this week that Gilead will have a long road ahead to effectively "cure" its initial test group of hepatitis C, which are typically in populations that already know they have the disease, such as in prisons or those covered by public health plans. "It will likely take six years to exhaust that initial group of 1.6 million patients," said Milligan. "Then we'll tap groups unaware they have HCV." He added that he thinks the duration of treatment will also come into play as payers begin to treat huge swaths of the 3.2 million estimated Americans infected with hepatitis C. "I'm not optimistic about four-week regimens for hepatitis C. I think it's more likely that six or eight weeks will work," he said. "When do you tell a hepatitis B patient they're cured? Will be open to debate, experimentation in coming years." Still, the idea that hepatitis B will be "the new hep C" has had him thinking, he said. "News of HCV cures has prompted conversations about doing the same for HBV. That's a totally different story," said, although he did hint that Gilead has not remained entirely disengaged. "We're exploring some ideas [on hepatitis B]. But we don't see new, big opportunities in virology at the moment in HBV and RSV."
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