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Gilead's Missed Sales Targets: A Symptom of Industry-Wide Challenges?

Philip CarterThursday, Apr 24, 2025 10:25 pm ET

42min read

The pharmaceutical industry is navigating a pivotal crossroads, where legacy drug declines, pricing pressures, and pipeline dependency are reshaping company trajectories. Gilead Sciences’ recent Q1 2025 earnings miss—driven by shortfalls in its oncology and cell therapy portfolios—spotlights vulnerabilities shared by peers like Merck & Co. and Bristol Myers Squibb (BMS). For investors, the question is clear: Are these misses isolated blips, or harbingers of deeper industry-wide challenges?

Gilead’s Mixed Performance: Core Strengths vs. Headwinds

Gilead’s Q1 revenue of $6.67 billion fell short of estimates, dragged down by its oncology drug Trodelvy ($293M, -5% Y/Y) and cell therapies ($464M, -3% Y/Y). While its HIV franchise—Biktarvy ($3.15B, +7%) and Descovy ($586M, +38%)—remained resilient, these gains were offset by first-quarter seasonal effects and Medicare Part D redesign pressures. The stock dropped 3.4% post-earnings, reflecting investor skepticism about near-term growth.

Yet, Gilead’s pipeline offers hope. The FDA is set to decide on lenacapavir, a once-yearly HIV injectable, by June 19. If approved, it could solidify Gilead’s dominance in HIV prevention. Additionally, Trodelvy’s Phase III data in first-line breast cancer (showing improved progression-free survival) positions it for broader use, potentially reversing its sales trajectory.

Merck: Oncology Triumphs Can’t Mask Geographic Pain

Merck’s Q1 sales of $15.5B were hamstrung by a 41% dive in Gardasil/Gardasil 9 ($1.3B), driven by weakened demand in China. This underscores a broader theme: geographic risk. While KEYTRUDA (+4% to $7.2B) and newer therapies like WINREVAIR ($280M) propelled oncology growth, China’s regulatory and market shifts are a persistent thorn.

Merck’s strategic moves—such as licensing an Lp(a) inhibitor from Hengrui Pharma—aim to offset these headwinds. However, tariffs and FX headwinds remain a drag, with EPS guidance lowered by $0.17. Investors will watch whether CAPVAXIVE (a 21-valent pneumococcal vaccine) can recapture lost ground in vaccines.

BMS: Growth Portfolio Outperforms, But Legacy Declines Loom

BMS narrowly beat Q1 estimates, with its growth portfolio ($5.56B, +16%) offsetting a 20% slump in legacy drugs. Opdivo ($2.27B, +9%) and Cobenfy ($27M in its first full quarter) were bright spots, though Cobenfy’s failed Phase III trial for adjunctive schizophrenia use has clouded its long-term prospects.

The real challenge lies ahead: Eliquis, a $3.57B blood thinner, faces generic competition in 2028 and Medicare price cuts in 2026. BMS’s $2B cost-cutting plan and raised guidance ($45.8–46.8B in 2025 revenue) suggest confidence in its pipeline, but investors must weigh near-term declines against future pipeline wins like zilovertamab vedotin (for lymphoma).

Common Challenges: A Triad of Pressures

Generic Erosion: All three companies face steep declines in older drugs (e.g., BMS’s Revlimid, Merck’s SIMPONI).
Pricing and Policy: Medicare Part D redesign, Inflation Reduction Act negotiations, and international pricing pressures are squeezing margins.
Pipeline Dependency: Success hinges on new therapies like Gilead’s lenacapavir, Merck’s WINREVAIR, and BMS’s Cobenfy.

Conclusion: Navigating the Crossroads

While Gilead’s Q1 miss was alarming, it is part of a broader industry pattern. Investors must assess whether companies can pivot to high-growth therapies while managing legacy declines. Gilead’s HIV franchise and upcoming approvals provide a sturdy foundation, but its stock—down 15% YTD—reflects skepticism about near-term growth. Merck’s oncology dominance and BMS’s cost discipline offer resilience, but geographic and regulatory risks linger.

The verdict? Investors should focus on pipeline execution and geographic diversification. Companies with late-stage therapies (e.g., Gilead’s lenacapavir, Merck’s CAPVAXIVE) and strategies to mitigate legacy losses will outperform. For now, the sector remains a tale of two stories: innovation triumphs in the lab, but execution challenges loom large in the marketplace.

In this environment, patience—and a keen eye on FDA decisions and pipeline milestones—will be critical. The next 12 months could separate the winners from the also-rans.

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