Business Corpus: Is Gilead's 2018 Hepatitis C Drug Franchise Outlook In Trouble?Gilead Sciences tumbled to an 11-month low Wednesday after reporting a three-part miss as both hepatitis C drug sales and HIV drug sales lagged views. The post Is Gilead's 2018 Hepatitis C Drug Franchise Outlook In Trouble? appeared first on Investor's Business Daily.

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Gilead Sciences (GILD) tumbled to an 11-month low Wednesday after reporting a three-part miss — producing "the first significant disappointment of the large-biotech earnings season," according to a Leerink analyst.

Wall Street estimates were too bullish for total revenue, HIV drug sales and the faltering hepatitis C franchise, Leerink analyst Geoffrey Porges said in a note to clients. He cut his revenue forecast by 6%-8% for 2018 and 2019.

"Our estimates were consistently too high as we failed to incorporate the increasingly acute reduction in both channel inventory and net price that dominated Gilead's first-quarter results and undermined reported sales," he said.

As a result, Gilead's $5.09 billion in total revenue lagged Porges' model by 13%. Hepatitis C drug sales missed his estimate by 27%, and revenue from HIV drugs came in 8% lower than he expected.

In afternoon trading on the stock market today, Gilead shucked off 7.4%, near 67.20. The stock toppled as much as 9% in earlier trades. Meanwhile, biotech stocks collectively rose a fraction.

Hepatitis C Drugs Sales Dive

Gilead's hepatitis C franchise has crumbled under the weight of its own success as high cure rates have led to fewer patients. Late Tuesday, Gilead reported its biggest year-over-year sales decline for hepatitis C drugs since it started reporting that unit separately.

By some estimates, hepatitis C drug sales beat expectations for $1.02 billion. But Porges noted that sales were 12% below another consensus model. New patient volumes fell 12% sequentially, but Gilead kept its expectation for the business to stabilize in mid-2018.

"Importantly, the company was totally frank with investors, which we appreciate, that it believes '2018 is a trough year,' " Mizuho analyst Salim Syed wrote in a note. "This is the first time, to our knowledge, that the company has specifically stated this."

Of the three hepatitis C drugs, Harvoni was hardest hit. Sales declined 46% sequentially and 75% year over year to $348 million. That missed expectations by $130 million to $140 million, according to several analyst reports.

Rival To Blame

AbbVie's (ABBV) drug Mavyret is partially to blame, Needham analyst Alan Carr said in a note.

New prescriptions of Mavyret "recently surpassed combined Harvoni and Epclusa new prescriptions and are now in reach of passing all Gilead hepatitis C products combined," he said. "Management believes drug pricing in the space has largely stabilized."

Gilead still expects 2018 hepatitis C drug sales to come in around $3.5 billion to $4 billion, Mizuho's Syed said. But Gilead doesn't typically adjust guidance much on its first-quarter earnings conference call, he noted.

"Doing the math now that pricing has 'largely stabilized,' Gilead's remaining quarters could perhaps look like $900 million, $800 million and $700 million," he said. "That basically hits the low end of the range ($3.5 billion)."

HIV Drug Sales Miss

During the quarter, HIV drugs raked in $3.33 billion, up 2%. But that missed views on an "exaggerated seasonal inventory effect," RBC analyst Brian Williams said in a note.

"Encouragingly, though, volumes and share metrics remain directionally favorable, suggesting the core franchise is still healthy and should perform well the rest of the year," he said.

Biktarvy, Gilead's newest HIV drug, brought in $35 million in the U.S., lagging the most bullish views. But Williams sees that number as indicative of a strong contribution from the drug in 2018.

It's also possible Biktarvy is already taking share from other drugs. The company notes that 80% of its volume is coming from patients switching to Biktarvy. A third are switching from Gilead's own Genvoya and 20% from GlaxoSmithKline's (GSK) drugs Tivicay/Triumeq.

"Gilead believes Biktarvy will become the No. 1 single-tablet regimen ultimately," Mizuho analyst Syed said. Gilead expects European regulators to approve Biktarvy in the third quarter.

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