Gilead CEO to leave, stock declines after earnings

Market trading boards are seen at the Australian Securities Exchange in Sydney, Friday, February 9, 2018. ( AAP Image/Ben Rushton) NO ARCHIVING

Gilead Sciences Inc. Chief Executive Officer John Milligan will step down at the end of the year, an abrupt departure from a drug company struggling with falling sales and profit.

Dr. Milligan, a biochemist by training who read scientific papers in his spare time, has spent 28 years at Gilead and served as CEO the past two years. After the board of directors finds a successor, he will also depart the board.

"I’m looking forward to a well-deserved break and moving on," Dr. Milligan said during an earnings call with analysts and investors.

Chairman John C. Martin will also step down from the board when the new chief executive is appointed, the company said.

The pair played key roles transforming Gilead from a fledgling antiviral drugmaker into one of the world’s biggest pharmaceutical companies by sales, though a frequent target of criticism for the high prices of its HIV and hepatitis C drugs.

Their departure means Gilead will have new leadership as it seeks to overcome falling revenue and profits, which have been dropping in recent quarters as competition has taken a toll on sales of its hepatitis C drugs.

The falling number of hepatitis C patients — Gilead’s therapies were successful at curing many of them — also has been cutting into sales.

The latest quarterly results reflected the company’s challenges. Total revenues fell 21% to $5.65 billion from the period a year earlier. Net income was $1.82 billion, or $1.39 a share, compared with $3.07 billion, or $2.33 a share a year ago.

Worldwide sales of Epclusa, Gilead’s newest hepatitis C therapy, declined to $500 million during the quarter, down from $1.2 billion.

Shares dropped 1.5% during after-hours trading.

Just four years ago, the Foster City, Calif., company had been among the pharmaceutical industry’s highest fliers on Wall Street.

Gilead joined the ranks of the biggest drug companies by sales and market capitalization thanks to the introduction of Sovaldi, a new kind of hepatitis C therapy that cured many patients and quickly notched billions of dollars in sales. At the time, it was the biggest drug launch ever.

But the company’s franchise of hepatitis C therapies proved to be as much curse as boon. Competition forced Gilead to discount its hepatitis C drugs heavily, and sales fell.

Analysts and investors had been pressuring Gilead in recent years to find new sources of growth. Last year, the company paid about $11 billion to dive into a new kind of cancer treatment, a cellular therapy known as CAR-T.

Yet sales for the crown jewel of the deal, a lymphoma treatment called Yescarta, have started slowly. Second-quarter Yescarta sales were just $68 million.

Gilead’s HIV franchise is a bright spot for the company. Revenues of the products rose to $3.7 billion in the quarter, a 13% increase from a year ago.

Executives described its $1 billion in quarterly hepatitis C sales as stabilizing because they were down only 4% from the first quarter. They also expressed high hopes for new treatments in development for fatty-liver disease, known as NASH.

"We continue to believe 2018 is a trough year for Gilead. We can grow in the future," Chief Financial Officer Robin Washington said during the conference call.

–Waverly Colville contributed to this article

Write to Jonathan D. Rockoff at [email protected]

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