Questions of the heart
On its way to becoming a bellwether biotech, Gilead Sciences Inc. saw its market cap jump some 50% in less than two years, climbing from about $26 billion in early 2006 to about $40 billion by October 2007.
Making a similar leap on the back of a new cardiovascular franchise may prove more challenging, if only because the starting point is so much bigger - the company is again valued at about $40 billion in the post-meltdown economy.
But reaching $60 billion also will require execution on a sales strategy and the addition of at least a third comparably sized product to its starting cardio portfolio. The value proposition also depends on market conditions, which is not within the company's control.
On the sales side, Gilead will be aiming to target physicians in specialty settings with a portfolio of oral compounds for chronic cardiovascular indications.
To get scale, it also will need to add a total of $400 million to $2 billion in product revenue. Gilead could hit the lower end of that range with its current portfolio thanks to the addition of CV Therapeutics Inc.'s Ranexa ranolazine, which is marketed for chronic angina, on top of Gilead's darusentan, which is in Phase III testing for resistant hypertension. But to reach the upper limit of that range, Gilead would need to make more acquisitions or license in products.
Then the valuation trajectory depends on the market.
For example, Gilead posted revenues of $5.3 billion in 2008. At a $40 billion valuation, each dollar of revenue translates into about $7.55 of market cap. Using that ratio, the company would need $8 billion in revenues to reach the $60 billion mark.
On the other hand, if stock market sentiment improves and Gilead gets back to the $50 billion market cap it had last summer, then each dollar in revenue would translate into $9.40 in market cap. At that ratio, Gilead would need only $6.4 billion in revenues to reach a $60 billion valuation.
Prior to acquiring CV Therapeutics for $1.4 billion in cash in April this year, Gilead had guided for 2009 net product revenues of $5.9-$6 billion, which was increased by $200 million to $6.1-$6.2 billion at the end of 2Q09 based in part on the addition of Ranexa.
If the company builds out a $1-$1.5 billion specialty cardiovascular business - which commercialization executives contacted by BioCentury agree