Replacing a biotech legend, Gilead's new CEO inherits sky-high expectations

Gilead's John Milligan

John Martin, the man who led Gilead Sciences ($GILD) from the basements of biotech to the verge of Big Pharma, is stepping down after 20 years, with longtime lieutenant John Milligan in line to take his place. And the California company, reaping huge rewards from its blockbuster hepatitis C franchise, now faces intensifying questions from Wall Street about just what its next act will entail.

Come March 10, Martin will step down from the CEO role and Milligan, now chief operating officer, will take over. Martin will assume the role of executive chairman.

Martin joined Gilead in 1990 and ascended to the CEO spot in 1996, overseeing the company's market-shifting work in virology that led to a host of major FDA approvals in HIV. But Gilead's biggest single move under Martin's watch was its 2011 deal to buy Pharmasset for roughly $11 billion, a then-controversial price tag that Martin said would shape the future of the company.

And he was right: Pharmasset's lead drug, sofosbuvir, won approval as Sovaldi two years later and ushered in a new era in hep C, quickly curing patients without the need for painful interferon injections. A year later came Harvoni, a combination therapy starring sofosbuvir, and Gilead now leads the pack of hep C drugmakers with a pair of agents on pace to bring in nearly $20 billion in 2015 revenue. Since signing the Pharmasset deal, Gilead's market value has increased more than 400%.

John Martin

But Martin's departure--and Milligan's ascension--come at a pivotal time for Gilead. Sovaldi and Harvoni, whose roughly $80,000-a-regimen list price set off a national controversy, are facing mounting competition from rival drugmakers. AbbVie ($ABBV), whose Viekira Pak won FDA approval in 2014, has challenged Gilead's dominance by inking exclusive deals with payers to snatch market share. And, the day before Gilead disclosed its succession plan, Merck ($MRK) won approval for a combination hep C treatment of its own with plans to sell it for $54,600 per regimen, undercutting its rivals to break into the space.

The rapid rise of new hep C contenders has led many analysts to conclude that the brightest days for Sovaldi and Harvoni have now passed, and some believe that if Gilead wants to maintain its pace of growth, it'll need to find a new Pharmasset. The company reported about $25 billion in cash and equivalents at the end of the third quarter, and Milligan has long hinted that Gilead is scouting for acquisitions that could expand its revenue horizons.

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