Gilead has taken a lot of hits lately. Here’s what it really has to fear

The drug maker Gilead Sciences has been remarkably resilient under a barrage of political attacks and public protests about the high prices of its medications. In recent weeks, though, it has hit some bumps: Deaths of patients taking its lone cancer drug. New competition for its most lucrative product. And this week, a loss in a high-stakes patent battle.

That turbulence has hit Gilead’s stock price. But its biggest financial challenge may well be more pedestrian: a declining flow of patients to take the company’s blockbuster hepatitis C drugs.

Sold as Sovaldi and Harvoni, the drugs have been used to treat about 380,000 people in the United States and about 390,000 in other parts of the world since they first went on the market in late 2013 and late 2014, respectively, according to Gilead spokeswoman Cara Miller.

Last year alone, Sovaldi and Harvoni generated $19.1 billion in sales. That was nearly two-thirds of total revenue for Gilead, a California company that also makes drugs to treat HIV, cardiovascular diseases, and other conditions.

That dependence on one class of products is a red flag for investors. “At some point we’ll just run out of patients,” said Brian Skorney, a senior research analyst who covers Gilead for the financial services firm Baird.

“The biggest question mark on Gilead from an investor’s standpoint isn’t the pricing issues, but … how durably are we going to see hep C patients come through the system,” Skorney said.

To be sure, Gilead has only reached a tiny fraction of the tens of millions of people around the world who have hepatitis C. Miller said the company is “confident in the long-term sustainability” of global hepatitis markets. She also pointed to efforts by companies, governments, and patient groups to improve diagnosis rates and access to care.

But Gilead has already treated a not-insignificant chunk of the patients who can be easily reached — and who have the means, either on their own or through insurance, to pay for the drugs. (A full course of treatment with Harvoni goes for $94,500 and with Sovaldi, $84,000, though insurers often negotiate substantial discounts.)

Gilead often can’t charge as much for its hepatitis C drugs overseas; indeed, in many countries, it sells the medications for less than 10 percent of the sticker price in the US.

While the American market seems large, with more than 3.5 million people infected, there are few new cases of hep C these days. The remaining untreated patients are disproportionately poor, homeless, or incarcerated. And many of those who have lived with the disease for decades aren’t inclined to seek treatment, sometimes because they were scared off by the bad side effects of older generations of medicines, or because they aren’t experiencing troubling symptoms.

Newly installed chief executive John Milligan told CNBC reporter Meg Tirrell on Wednesday that looking forward, “the big barrier to treating everybody will be identifying them and getting them into treatment.”

Gilead has said it expects sales from Sovaldi and Harvoni to flatten this year. New US prescriptions of Harvoni, the newer and now much more heavily prescribed of the two medications, have tapered off since peaking last spring, though they recovered somewhat this month, according to weekly estimates from the research firm Symphony Health Solutions.

The challenge is especially acute because Sovaldi and Harvoni work so well. Many bestselling drugs that treat chronic diseases must be taken for years or even decades. But the Gilead products can cure hep C in a couple months, and the patient never needs to take them again.

To add to Gilead’s challenges, rival pharmaceutical company Merck got approval this year for its own hepatitis C drug, Zepatier, which competes with Harvoni and which starts at a much lower sticker price, $54,600 per treatment.

And a federal jury in Northern California this week found that Merck’s scientists made some of the key discoveries that led to the development of Gilead’s big hepatitis C drugs. Late Thursday, the jury ordered Gilead to pay Merck $200 million in damages for infringing on those patents. A separate hearing will determine how much Gilead should pay Merck in royalties on sales of Harvoni and Sovaldi.

Another wild card for Gilead: The attorney general of Massachusetts in January threatened to sue the company over the high cost of the hep C drugs, saying that its pricing strategy may be an unfair trade practice.

Then there’s Gilead’s blood cancer drug, Zydelig, which is on the market but continues to be tested in clinical trials.

Last week Gilead shut down six of those trials over significant safety concerns, including patient deaths. The Food and Drug Administration issued a warning to health care professionals. Zydelig wasn’t a big revenue source for Gilead, but still, the setback — along with the departure of a key scientist — raises questions about whether the company can move into oncology, as it had planned in a bid to diversify.

Amid a broader slide in the biotech market, Gilead’s stock price has dropped 25 percent since its recent peak last June. Some investors are clamoring for the company to acquire new drugs, while others want Gilead to stand pat.

“There is nothing more fascinating than being in an investor dinner with two groups pairing off against each other,” Milligan said on CNBC on Wednesday. “Sometimes I don’t even have to talk in those meetings.”

This story has been updated with information about the damage award in the patent infringement case.