Gilead Sciences Inc. (NASDAQ: GILD) is a biopharmaceutical company specializing in the research, development, licensing and commercialization of antiviral products treating hepatitis C virus (HCV), hepatitis B virus (HBV) and human immunodeficiency virus (HIV), and medicines for cardiovascular, inflammation and oncology treatments. The company markets over 18 drugs throughout the world, with over 15 pipeline candidates in various stages of research and approval.

Gilead generated annual revenues of $32.15 billion in fiscal year 2015, up 31% from 2014. The top three most profitable antiviral products account for over 65% of the company's total sales. For the nine months ending Sept. 30, 2015, Harvoni accounted for 43.4% of total company revenues, Solvadi accounted for 16.7% and Truvada accounted for 10.6%. These products address the HCV and HIV patient segments.

Truvada

Gilead purchased Triangle Pharmaceuticals in 2003 to acquire key component emtricitabine (Emtrivia), which was combined with tenofovir (Viread) in a fixed dose to develop Truvada, an HIV-prevention drug for adults at high risk for the HIV-1 infection. The drug received FDA approval in July 2003. Originally prescribed to prohibit the manifestation of active HIV infections into full-blown AIDS, it has since been accepted as a preventative treatment when taken orally on a daily basis. Truvada generated $2.52 billion in revenue for the first nine months of 2015.

Soldvadi

Sofosbuvir, named after creator Michael Sofia, was a nucleoside developed in 2007. It was the first drug to treat HCV without using interferon. In 2011, Sofia's employer, Pharmasset, a tiny publicly traded 82-person biotech with $91 million in annual losses on $900,000 in revenues, tested sofosbuvir (PSI-7977) on 40 infected patients in an unpublished clinical trial and accomplished a stunning 100% cure rate with no toxic side effects. Existing HCV medications required combining treatments with toxic interferon, causing many patients to opt out from the side effects.

Gilead was having setbacks with its own in-house development of an HCV treatment. It pounced on the opportunity to acquire the most revolutionary HCV treatment to date. To block any competing bids, Gillead proposed a whopping $137-per-share takeover offer, up from its original $100-per-share offer. At the time, the acquisition of Pharmasset was the largest-ever biotech acquisition at $11.2 billion in November 2011. Gilead ultimately paid a 94% premium to procure PSI-777, which was still in phase 3 clinical trials.

Gilead received a lot of criticism for recklessly betting one-third of the company's market cap on an unproven and unapproved product. Pharmasset never received any other formal counteroffers after the initial $100 bid by Gilead. In essence, Gilead had outbid itself. Gilead stock was punished initially, selling off 9.1% to $36.26. By 2013, Gilead received FDA approval for its HCV drug to be marketed as Sovaldi. Worldwide sales of Solvaldi climbed to $5.3 billion in fiscal year 2015.

Harvoni

In 2014, Gilead introduced Harvoni, a single-pill combination of sofosbuvir and ledipasvir (GS 5885), for 12-week treatments that effectively cure HCV genotype 1 infections with a 94% and higher success rate. The FDA approved Harvoni on Oct. 10, 2014. Since then, Gilead stock has climbed from $62 on the announcement to all-time highs of $123.37 in June 2015. Worldwide sales of Harvoni climbed to $13.9 billion in fiscal year 2015. The company estimates that there are 185 million people worldwide who are infected with HCV.

Pricing Controversy

Gilead's blockbuster success of Solvaldi and Harvoni have drawn heavy criticism from regulators due to public outrage over the pricing of treatments. In the United States, a 12-week treatment of Harvoni is priced at $94,500, averaging $1,125 per pill. Due to the high costs, health insurers have been known to limit access or only authorize the treatment in cases where damage has progressed to cirrhosis. The company contends that its HCV treatments save money by curing the infection rather than prolonging months to years of treatments with cheaper medications.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.