The man everyone is watching as heir to the hep C treatment fortune
Name: John Milligan
Title: CEO of Gilead Sciences
The phenomenal success of the Gilead Sciences ($GILD) hep C juggernaut not only enriched the Foster-City, CA-based biotech, it put huge pressure on other CEO's whose investors want to know when their CEOs are going to orchestrate a success like that for them. Now that John Milligan has succeeded John Martin as CEO at Gilead, everyone is watching to see how he will invest all that cash generated by the biotech's hep C juggernaut for clues of where they too should be exploring for the next big thing.
Some competitors would like think that Gilead's success in hep C was mostly great luck, a risky roll of the dice that paid off big-time but which could have just as easily crapped out. When GlaxoSmithKline ($GSK) CEO Andrew Witty last year referred to Gilead's success from the $11 billion buyout of Pharmasset, a "one in a thousand shot," he was not only defending his own company's play-it-safe strategy, he was expressing the frustration that competitors are feeling when their own investors want to know why they haven't pulled off just such a coup.
One of the things laid bare in an 18-month Senate investigation into Gilead's controversial pricing of the hep C therapies, was that the Gilead bonanza was as calculated as it was fortuitous. Martin, Milligan and team set a goal to conquer that market, calculated the obstacles, then charged up that mountain without hesitation. They picked an aggressive price for first-out-of-the-gate Sovaldi that they knew would draw screams of protest, but would allow them to go even higher with follow-up regimen Harvoni. They decided they would just have to face down the kind of backlash that would wither more genteel executives.
The strategy paid off. Gilead's market value has increased more than 400% since it inked the Pharmasset deal. Its revenues were more than $32 billion last year and it is sitting on more than $25 billion in cash and equivalents. That provides Milligan with a huge opportunity.
During the company's year-end earnings report, Milligan acknowledged that with the tripling of the company's revenues, vis-a-vis Harvoni and Sovaldi, the time to do that is now. But he also has a lot of leeway to execute. Gilead's execs acknowledged during their call that most of the low-hanging fruit in the hep C field had been plucked and going forward sales growth will be harder to come by. Sales in the U.S. are expected to be flat this year. But they also pointed out that there are still millions of people in the world with hepatitis C to be treated, and millions more that have yet to be diagnosed, so sales should remain strong.
Of course, that success creates enormous expectations on Wall Street for Milligan to perform. And while it might relieve some of the pressure on other CEOs if he would flail around for a bit, it is at their own competitive peril that anyone would sell Gilead or Milligan short. He comes in as a battle-hardened lieutenant, who spent 20 years helping execute Martin's take-no-prisoners style. Milligan was there as Martin directed the company's moves into virology to lead the pack in HIV drugs, through the 2011 Pharmasset acquisition and resulting success. There is no reason to think Milligan can't match, if not exceed, his mentor's success.
Let's also not forget, Milligan is not alone in this pursuit. By taking an "executive chairman" title, Martin made it clear he is not simply ceding control of Gilead. The two have made a dynamic duo for two decades. There is no reason they can't continue that for another.
-- Eric Palmer (email | Twitter)
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