Gilead locks in Daniel O'Day as CEO, tapping the Roche vet to rejuvenate growth
The suspense over who will succeed John Milligan at Gilead has finally ended.
Daniel O’Day, current CEO of Roche’s Pharma division, has been tapped for the top job, Gilead announced days before Milligan is set to depart from his corner office.
O’Day’s appointment ushers in a new era for the Foster City, CA-based big biotech, which Milligan and his predecessor, John Martin, ran for nearly three decades, creating an HIV powerhouse and an industry-dominating hepatitis C franchise. In recent years, however, it’s seen its revenue shrink as competition heats up and the painless cure effectively downsized the market.
Martin has previously announced his departure as board chairman, amid an executive exodus that also claimed R&D head Norbert Bischoberger, CMO Andrew Cheng and commercial chief James Meyers (who is retiring).
Before O’Day assumes his role on March 1, 2019, Gregg Alton — a 20-year veteran of the company who’s served as general counsel and, most recently, chief patient officer — will man the fort as interim CEO.
Investors welcomed the news, sending Gilead shares $GILD up 2.5%.
O’Day, who Jefferies’ Michael Yee describes as “pretty straight down the road” in terms of risk taking without a history of big M&A dealing, graduates from Roche as a 30-year veteran of the Swiss pharma giant, having started with commercial and sales roles in 1987. Since taking control of the pharma unit in 2012, he’s overseen the launch of several potential blockbuster drugs including Hemlibra and Tecentriq.
Roche’s Pharma division is an academy for CEOs. Pascal Soriot, Dan O’Day. Whoever is next will be one too.
— Brad Loncar (@bradloncar) December 10, 2018
Baird’s Brian Skorney, meanwhile, offers a decidedly glowing review of the new CEO:
(I)n his role at Roche, we think he has done a phenomenal job at navigating the company into a next generation of products (Ocrevus, Hemlibra, polatuzumab are just a couple of products we see as new, impactful blockbuster drugs). Most importantly, we believe the long history at Roche makes him a choice that isn’t likely to break an already good company. While we expect that replacing the head of one of the strongest management teams ever seen in biotech to be a challenging role, we think that O’Day is highly qualified and should ease investor concerns leading into Milligan’s retirement.
While investors keenly await a strategic plan and vision from O’Day, analysts at Jefferies laid out a possible scenario:
We believe O’Day will look to develop a strategy over the course of 2019 and it will include a view on deploying GILD’s current cash of ~$32B towards more oncology assets and other key areas, such as inflammation and liver diseases. Note’s GILD’s current debt-to-EBITDA ratio stands at roughly ~2.6x so the company could still lever up to do more deals. (…) we can assume his plan-of-action for 2019 is to ensure that: (1) HCV stabilizes and becomes more “predictable”, (2) HIV grows as Biktarvy continues to reach record revenues, and (3) Yescarta grows each quarter as the company continues to expand its presence in hematology (e.g. allogeneic CAR-T) and solid tumors (neo-antigens).
Faced with a waning hep C franchise, Gilead has swallowed Kite Pharma in a bid to become a leader in CAR-T, snapping up new technologies along the way. It is now up to O’Day to galvanize the sales of Kite’s CAR-T therapy Yescarta, which despite impressive survival rates generated a paltry $183 million for the first nine months of 2018.
Meanwhile in Basel, Genentech CEO Bill Anderson will fill O’Day’s shoes.
Image: Daniel O’Day. ROCHE