Gilead Earnings Sound Death Knell (Again) for Large Sales Forces

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Gilead’s third quarter numbers blew everyone away — revenues up 30 percent, net income up 26.5 percent.The numbers call into question the value of large sales forces.

A couple of days ago BNET noted that Abbott Labs got a “spectacular” $3.63 per dollar spent on marketing. The company achieved that in part by laying off staff.

But that was nothing compared to Gilead. Here are its comparable numbers: $7.25 in revenues and $5.66 in gross profit. Which makes Gilead one of the most effective marketers on the block. The growth in the productivity of its marketing dollars was 24 and 23 percent, respectively. Astonishing.

That growth came after its HIV drug, Truvada, beat GlaxoSmithKline’s Epzicom in a head-to-head trial, making it the first-line defense against AIDS.

Anyone employed as a sales rep at a large pharma company should be very worried by Gilead’s financial numbers. They strongly suggest that if your company has a drug that works you pretty much don’t need marketing. Gilead spend less than 14 percent of its revenues on sales and ads, about half the margin in major pharma companies.

Tags: Revenue, Sales Force, Pharmaceutical Company, Earnings, Gilead, Sales Strategy, Marketing Research, Sales Force Management, Sales, Marketing, Jim Edwards

Jim Edwards, a former managing editor of Adweek, has covered drug marketing at Brandweek for four years, and is a former Knight-Bagehot fellow at Columbia University's business and journalism schools. Follow him on Twitter or send him an email.

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jsegurit

10/18/08 | Report as spam

RE: Gilead Earnings Sound Death Knell (Again) for Large Sales Forces

This is an interesting observation, and I do believe that industry-wide scaling down of sales forces are happening in response to patent expirations and dearth of new products. However, to extrapolate from Gilead's results could be misleading because its product portfolio (mainly in the AIDS/Hepatitis market) may enjoy higher sales carryover due to product loyalty and the inelasticity of demand for HIV drugs. Other therapeutic areas like cardiovascular, diabetes, psychiatric, etc. seem more competitive with high rates of product switching. In these areas, scaling back of sales force effort may indeed lead to declining top-line numbers.
2

BNET's Jim Edwards

10/19/08 | Report as spam

RE: Gilead Earnings Sound Death Knell (Again) for Large Sales Forces

Point taken: Companies marketing serious-condition drugs (such as cancer) to specialists will always need less marketing than those marketing general population pills to primary care docs. So Gilead is an outlier. But I think the general principle holds: If you develop the best drug in your category then you're going to need proportionately fewer marketing dollars to generate its revenues.