Gilead Sciences' Future in 3 Simple Slides

By Markets Fool.com

Thanks to the launch of the hepatitis C drug Sovaldi in December 2013, Gilead Sciences' sales and income roughly doubled in the past year. The company's sales surge -- and the corresponding boost to the company's balance sheet -- shouldn't be ignored, but investors are right to wonder what might lie ahead for the biotech giant, especially in the wake of AbbVie launching its own hepatitis C drug in December. Fortunately, Gilead Sciences recently offered up insight into its future, including three slides that sum up the company's opportunities nicely.

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1. Dominating HIV therapy
While Gilead Sciences' hepatitis C drugs have gotten all the press in the past year, the backbone of its success remains HIV treatment.

The company markets the planet's top-selling HIV medicines, including five therapies that are likely to eclipse billion dollar blockbuster status this year. As the following slide shows, Gilead Sciences' Stribild, Complera, Atripla, and Truvada are by far the most widely used HIV medicines.

Source: Gilead Sciences

Overall, Gilead Sciences' HIV drugs generate sales of more than $10 billion a year, but Gilead Sciences' future in HIV could be even brighter thanks to TAF, a new formulation of its top-selling HIV drug Viread, which is a key component in the single tablet regimens Stribild, Complera, and Atripla.

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TAF delivers the same efficacy as Viread, but at a much lower dose, and that means that TAF is less toxic and more easily combined with other HIV drugs to create additional all-in-one tablets. By replacing Viread with TAF in its various single pill combination therapies, Gilead Sciences solidifies its HIV franchise by extending patent protection beyond Viread's patent expiration in 2017.

2. Advancing hepatitis C leadership
Sovaldi sales totaled more than $8.5 billion through the first nine months of 2014, and hepatitis C sales likely went higher in the fourth quarter thanks to the FDA approval of Harvoni in October for use in genotype 1 HCV patients.

But worries remain that AbbVie's recently approved hepatitis C drug cocktail Viekira Pak could cut into Gilead Sciences' market share and force a price war that could weigh down top line sales. Those price war worries are already playing out given that AbbVie reportedly offered a price discount to secure exclusivity with the pharmacy benefit manager Express Scripts, and Gilead Sciences similarly discounted the cost of its drugs to land exclusivity on drug plans that rely on CVS Health.

However, before investors get too antsy about that risk, they should know that Gilead Sciences is already developing the next generation of hepatitis C drugs. These new formulations combine Sovaldi with GS-5816 and possibly GS-9857 in a bid to create more effective therapies that can be used to treat all genotypes of the disease. If those studies go well, then any negative impact from AbbVie could prove to be short-lived.

Source: Gilead Sciences

3. A robust pipeline
Gilead Sciences' HIV and HCV drugs should continue to produce significant sales, but the company also has a big pipeline of drug candidates that could move the needle, too. Overall, the company has 25 programs under way, including studies evaluating drugs that could treat cancer and the liver disease NASH.

Last summer, Gilead Sciences won approval for its first cancer drug, Zydelig, as a therapy for chronic lymphocytic leukemia, or CLL, and the company hopes to expand Zydelig's label over time. Currently, the company has 20 clinical trials studying Zydelig, including as a first line treatment for CLL. Additionally, Gilead Sciences is developing GS-9973 for relapsed blood cancer and momelotinib for myelofibrosis.

In NASH, Gilead Sciences has an ongoing phase 2 trial studying simtuzumab. That trial should have data available for investors by year's end. The company is also moving GS-4997 into phase 2 as a treatment for NASH in the second quarter. And earlier this month, the company acquired the preclinical NASH assets owned by Phenex to further enhance its position. If those programs pan out, Gilead Sciences could end up with another multibillion-dollar indication, since NASH is the third most common reason for liver transplants and currently has no currently approved treatment options.

Source: Gilead Sciences

And another thing
Gilead Sciences' opportunity to continue generating significant sales in HIV and HCV, as well as its opportunity to expand into oncology and develop a NASH treatment, are intriguing, but one of the most compelling reasons to own Gilead Sciences may be its financials. Exiting the third quarter, the company had $6.2 billion in cash on the books and another $1.375 billion in long-term investments. That's up from $2.1 billion in cash and $439 million in long-term investments exiting 2013. Since the company's likely to continue to generate substantial cash flow again this year, its balance sheet should improve even more in 2015. With a stable of top-sellers, a growing cash stockpile, and forward price to earnings ratio of less than 10, Gilead Sciences could remain among the most attractive stocks in the industry.

The article Gilead Sciences' Future in 3 Simple Slides originally appeared on Fool.com.

Todd Campbell owns shares of Gilead Sciences. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Legal beagles won't let me ask them or let them tell me. The Motley Fool recommends CVS Health, Express Scripts, Gilead Sciences, and Johnson & Johnson. The Motley Fool owns shares of Express Scripts, Gilead Sciences, and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.