“People are worried about the cash in our pocket,” O’Day said with a grin at the STAT Summit on Wednesday. And Gilead, which had about $25 billion in cash at the end of the last quarter, is “in an acquisitive mode,” he said.
But that doesn’t mean O’Day is planning to pull the trigger on a megadeal to please Wall Street. For one, “there’s a lot more going on inside Gilead than the outside world knows,” he said. And then there’s the fact that buying and consuming promising companies has a way of sapping promise.
“If you want to retain the best researchers, acquisitions often encourage them to walk out the door,” O’Day said.
That was the thinking behind the CEO’s signature deal at Gilead, a $5 billion agreement with Belgian drug developer Galapagos. That effectively doubled Gilead’s scientific reach and bolstered its pipeline, but it allowed Galapagos to remain independent, creating a win-win situation that plays to each party’s strengths, O’Day said.
“I do believe that Gilead is in a sweet spot,” he said. “Sometimes I refer to it as a teenager in an adult’s body: It’s still an entrepreneurial biotech company, but it has this extraordinary firepower.”
In the meantime, Gilead is still piecing together its third act. The company made its name in virology, with blockbuster medicines for HIV and hepatitis C, but its forays into cancer medicine have led to mixed results. Gilead’s $12 billion acquisition of Kite Pharma, maker of CAR-T immunotherapies, has yet to prove itself as a wise investment.
The path forward, O’Day said, is finding avenues in oncology where Gilead can stand out from its competition, rather than investing in me-too ideas that would fight for diminishing returns. That means picking battles.
“I want to make sure we’re not trying to be all things to all people in oncology,” O’Day said.
O’Day was similarly measured on the other major issue he inherited: a patent dispute with the U.S. government. The Department of Health and Human Services claims that Gilead’s Truvada, an HIV-prevention pill that brings in more than $2 billion a year, infringes federal patents. Gilead disagrees, and the two parties are fighting in court.
O’Day maintained that his company has “the seminal patent rights” but argued that Gilead and HHS, despite their legal dispute, are spending more time collaborating on public health than squabbling over royalties.
“I honestly believe that the elimination of HIV is within our grasp in the U.S.,” O’Day said. “We’re firmly focused on that. You would think we’re fighting with the government. We’re actually not.”