(Bloomberg) — Gilead Sciences Inc. (Nasdaq:GILD) Chief Executive Officer John Martin, under whom the company developed one of the fastest-selling drugs of all time, will step down and be replaced by Chief Operating Officer John Milligan.
Martin, 64, will remain as executive chairman. He has served as CEO since 1996, a year when the company’s total market valuation, about $1 billion, was less than the company’s two blockbuster hepatitis C treatments now bring in in a single month.
Milligan, 54, joined Gilead in 1990 as a research scientist, with a Ph.D. in biochemistry, according to the company’s website. He became CFO in 2002, and COO in 2007.
The company’s shares fell 3.5 percent to $84.35 in early trading in New York. Over the last five years, they have gained more than five-fold, far outpacing gains in broader indexes.
In 2011, the company agreed to buy Pharmasset Inc. and its drug PSI-7977 for about $11 billion, a hefty 94 percent premium. When the deal was announced, Milligan said that Gilead was willing to pay so much partly because it saw the drug as critical to the future of hepatitis C, and had been told that competitors felt the same way.
“It was clear that if we were going to become competitive with the larger companies this would be an important thing for Gilead to have,” he said in a 2011 interview. “So we made a very difficult decision to do an acquisition which is much larger than we typically like to do, but one that we felt was very important for the company.”
That decision paid off. PSI-7977 became Sovaldi, which was approved in 2013 and offered hepatitis C patients a fast, almost certain cure for their disease without a lengthy course of side-effect heavy injections, which were until then the standard of care. Gilead combined it with another drug to create Harvoni, which was approved in 2014. Together, the drugs are projected by analysts to have sold $18.8 billion in 2015, when Gilead reports full-year results next week.
They also touched off a debate in the U.S. over the price of pharmaceuticals. Sovaldi was introduced with a list price of $84,000, or $1,000 a day for the 12-week course. Harvoni cost $94,500, though Gilead has agreed to give discounts to health insurers that cut the price of both drugs. Yet it made the company a target for politicians, patients and health insurers to criticize the company, and the industry at large, over whether it was charging too much.
It also left the door open for rivals to try and undercut Gilead on price. AbbVie Inc. came to market with its own treatment in December 2014, two months after Harvoni was approved, and quickly negotiated exclusive deals to have insurers cover the drug, in return for discounts. Gilead was forced to do the same. And on Thursday, U.S. drugmaker Merck & Co. introduced its own next generation hepatitis C treatment with a list price of $54,600, about $40,000 cheaper than Harvoni.
That price competition was responsible for much of the stock decline in early trading Friday, said Mark Schoenebaum, an Evercore ISI analyst, who also said the CEO change was expected. The “street absolutely loves Milligan,” he said in an e-mail.
—With assistance from Doni Bloomfield.
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