• In an unexpected statement ahead of its second quarter earnings release Wednesday evening, Gilead Sciences said its well-liked CEO John Milligan will step down and leave the company at the end of the year.
• A search for a successor is now underway. Chairman (and former CEO) John Martin will also leave the company once a new head honcho is selected.
• Total revenue for the quarter came in at $5.6 billion, ahead of analysts’ consensus expectations. The HIV franchise continued to grow, bringing in $3.6 billion, while hepatitis C revenues stabilized at $1 billion, and CAR-T therapy Yescarta wowed with an unexpected $68 million, growing faster than expectations.

While Milligan has been at Gilead for 28 years, the exec has only been in the top slot since 2016. Martin handed the reins over to his protege just as the supercharged hepatitis C franchise began to dip. Once considered just a mid-sized biotech, Gilead became essentially a big pharma after Sovaldi (sofosbuvir) was shown to be curative for the infectious disease. Collectively, the four sofosbuvir-based products have brought in more than $55 billion for the company since entering the market in late-2013.

It was always known that Sovaldi and the hepatitis C franchise would be a flash-in-the-pan for Gilead, as cured patients no longer needed the medicine and other competitors entered the market with similar, cheaper offerings. But even with that in mind, investors have dogged the company and management about making a backup plan.

Milligan spent much of his first year as CEO fighting off questions about what major acquisition the company would make. He surprised the market with the $11.9 billion buy of CAR-T company Kite Pharma in 2017. Kite’s lead drug candidate gained approval shortly after the deal announcement and has been growing slowly but steadily over the course of its three quarters on the market.

Yet, it’s still way too early to call the Kite deal successful. Even if Yescarta and follow-on products continue to grow, they likely won’t fill the gaping hole the hepatitis C products have left in the topline. Gilead’s HIV franchise is also looking good, and prospects for its non-alcoholic steatohepatitis drugs are positive. But Milligan’s (and Martin’s) sudden departure indicates that turnaround may be too optimistic a word to describe Gilead’s current path.

“Our view, is this is probably a Board decision (and not necessarily CEO decision given comments say he will be taking a break) to invigorate the company and to bring on fresh leadership to turn GILD from pharma-like, to more biotech-like,” wrote Jefferies analyst Michael Yee in a note to clients.

But becoming more ‘biotech-like’ once again will likely require a significant amount of business development activity. And without a chosen successor, it’s unclear if a new CEO will be up to the task.

“And so we have a very active business development team. You’ll see many things coming to fruition in the second half of this year. The announcement today is not going to slow us down, and the board has given us the go-ahead to move with these transactions if they meet our criteria. So I’m confident in the baseline. I’m never satisfied, and I know my team is not satisfied and we will continue to move forward. And so that’s our message,” said Milligan on the Wednesday earnings call.

Gilead’s stock opened trading about 3% lower on Thursday.