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Analyzing Gilead’s Market Expansion Strategy

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Market expansion strategy

In 2016, Gilead Sciences projected a rise in new patients opting for the company’s HCV (hepatitis C) drugs in Europe. This is due to gradual stabilization in new patient uptake in the early launch markets such as the United Kingdom, Germany, and France. It’s offset by strong initial patient uptake in new markets such as Italy and Spain. The company also expects to witness the positive impact of warehoused demand in the Japanese market in 2016. To learn more about demand for Gilead’s HCV drugs globally, read Gilead Sciences Continued to Expand HCV Markets in 3Q15.

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In 2015, about 113,000 new patients were treated with the company’s HCV drugs, Sovaldi and Harvoni, in Europe. After receiving a positive recommendation from the National Institute for Healthcare and Excellence for Harvoni on July 29, 2015, the number of new patients initiating the company’s HCV therapy rose in the United Kingdom in 4Q15. Since the launch of the company’s HCV drugs Sovaldi and Harvoni on May 25 and September 1, 2015, respectively, in the Japanese market, the warehoused demand also boosted Gilead’s HCV revenue in 4Q15.

However, investors are concerned that similar to the US market, the demand in Europe and Japan will flatten out in future quarters. Also, unexpected trends such as a lack of funding from the government and a change in pricing regulations can impact the company’s HCV revenue and profit margins. These concerns have been contributing to low relative valuation multiples for Gilead Sciences (GILD) compared to peers such as AbbVie (ABBV), Biogen (BIIB), and Celgene (CELG).

New markets

Gilead Sciences is yet to launch its HCV drugs in many other small and medium-sized markets. In December 2015, the company completed its pricing and reimbursement related negotiations for its HCV drugs, Sovaldi and Harvoni, in Australia. The company’s performance in Asia-Pacific and Latin America is also expected to drive the growth of its HCV portfolio. Strong revenue growth in the new markets and a subsequent rise in Gilead’s share price is also expected to benefit the PowerShares QQQ (QQQ). Gilead Sciences accounts for about 2.7% of QQQ’s total portfolio holdings.

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