Is Gilead on the acquisition trail?

Speculation is mounting that Gilead could be on the acquisition trail after the company posted Q2 results showing sliding sales of its hepatitis C medicines, Sovaldi and Harvoni.

Sales of the drugs, now including recently-approved Epclusa (sofosbuvir+velpatasvir) covering all six disease genotypes, were around $4 billion, down from $4.9 billion in last year’s Q2.

Epclusa was approved half way through the last quarter in the US and should be available in the EU soon after a recommendation from regulators.

The company will no doubt hope this will boost sales, and patients may well have been waiting for the new drug to come out.

In most cases patients won’t have to take ribavirin with Epclusa, a clear advantage over its rivals.

With Epclusa, Gilead has also undercut prices of rivals from AbbVie and Merck, so the company hopes for sales to bounce back later this year.

Nevertheless Gilead cut sales guidance to between $29.5 billion and $30.5 billion for 2016, down from a range between $30-31 billion.

With around $24.6 billion in cash, Gilead could be considering an acquisition to boost sales.

CEO John Milligan in a Q&A session with investors gave some clues about Gilead's next move.

Gilead’s most famous deal was the $11 billion purchase of Pharmasset in 2011, which landed the company with sofosbuvir – the key component of its hepatitis C drugs.

But it remains to be seen whether the company is prepared to take such a big gamble. In fact this looks unlikely.

In the conference call with investors, Milligan, who took over as CEO from John Martin at the beginning of the year, cited a deal in December with Belgian biotech Galapagos to develop filgotinib for rheumatoid arthritis and other diseases.

While the deal could be worth around $2 billion, it’s not a major acquisition on the scale of the Pharmasset deal.

Milligan said: “We’re very interested in continuing that and add more things to our pipeline, especially in the non-antiviral area where we continue to see growth in franchises.”

Unless Milligan was throwing a curveball with those comments, it looks like the company will be unlikely to make a big money move like the Pharmasset deal and will opt for smaller "bolt-on" acquisitions.