Gilead Reports Another Solid Quarter

Gilead Sciences (GILD) reported financial results for the second quarter of 2009 on July 21, 2009. Total revenues increased 29% year over year to $1,647.2 million, beating our forecast by $35 million. 

Revenues were driven by the company’s HIV franchise which posted sales of $1,410 million, up 26% year over year. 

HIV franchise sales consisted of Viread at $159 million, Truvada at $608 million and Atripla at $569 million. Sales of Atripla, which is a combination of Truvada and Bristol-Myers Squibb’s (BMY) Sustiva, increased 60% year over year. However, there was some inventory stocking during the reported quarter. 

Total product sales for the second quarter were $1,568 million, an increase of 27% year over year. Products like Hepsera ($67 million), AmBisome ($73 million), Letairis ($44 million), and Ranexa ($36 million) also contributed meaningfully to revenues. Royalties and other revenues totaled $78.8 million. 

Adjusted net income increased 36% to $648.9 million in the reported quarter. This equated to earnings per share of $0.69, up 41% year over year and 4 cents above our forecast. GAAP net income, which includes stock-based compensation and acquisition-related costs, totaled $571.4 million, or $0.61 per diluted share. Second quarter results included contributions from the recently acquired CV Therapeutics, Inc. 

Following the release of second quarter results, Gilead updated its guidance for 2009. Although the company increased net product revenue guidance for the year, Gilead also announced an increase in operating expenses. R&D spend should increase considerably this year as the company works on the development of a new HIV combination drug with Johnson & Johnson (JNJ). Net product revenues are now expected in the range of $6.1 to $6.2 billion, compared to the earlier guidance of $5.9 to $6 billion. 

We maintain our Hold rating on Gilead with a target price of $50. Earnings over the past few quarters have been above expectations specifically on strong sales of the HIV franchise. Going forward, we remain optimistic on the growth prospects of Truvada and Atripla. For 2009, we see EPS at $2.68, up 21%, on sales of $6.6 billion.

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