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Gilead Sciences, Inc.’s (GILD - Free Report) fourth-quarter 2016 earnings (including the impact of stock-based compensation expenses) of $2.64 per share beat the Zacks Consensus Estimate of $2.31. However, earnings were down from $3.27 in the year-ago quarter.
Moreover, total revenue in the reported quarter came in at $7.3 billion, down 13.9% year over year. Nevertheless, quarterly revenues marginally beat the Zacks Consensus Estimate of $7.2 billion.
Shares of Gilead have underperformed the Zacks classified Medical-Biomedical and Genetics industry in the last one year with the stock losing 19.9% during this period, compared with the industry’s decline of 0.4%.
HCV Franchise Disappoints Again, HIV Impresses
Product sales came in at $7.2 billion, down 14.2% year over year. The decline was due to lower hepatitis C virus (HCV) sales, partially offset by higher sales across HIV and other therapeutic areas.
Antiviral product sales, which include Gilead's HIV and liver disease portfolios, came in at $6.6 billion in the fourth-quarter 2016, down 16.4%.
HCV product sales, which include Harvoni, Sovaldi and the recently launched Epclusa, were $3.2 billion, down 34.7%. The downside was mainly attributed to lower sales of Harvoni and Sovaldi, partially offset by sales of Epclusa (launched in 2016) across various locations.
Sales of Harvoni declined 51% year over year to $1.6 billion in the reported quarter. The decline was mainly due to lower sales in the U.S. (down 42.8% to 976 million) and Europe (down 38.2% to $363 million). Further, Sovaldi sales recorded a year-over-year decline of 65% to $541 million.
Epclusa garnered sales of $1.0 billion in the reported quarter, significantly higher than $640 million reported in the prior quarter. We note that Epclusa was launched in the U.S. and Europe in June and July, respectively.
Meanwhile, HIV and other antiviral product sales came in at $3.4 billion, up 13.3% year over year. The increase was primarily driven by continuous strong uptake of tenofovir alafenamide (TAF)-based products such as Genvoya, which generated sales of $563 million, up from $461 million in the prior quarter; Descovy, which recorded sales of $149 million, up from $88 million in the third quarter of 2016; and Odefsey, which registered sales of $155 million, up from $105 million in the year-ago period.
HIV treatments like Stribild and Complera/Eviplera declined while Viread was up 6% to $297 million). However, Atripla sales tanked 24% to $607 million, while Truvada sales fell 7% to $868 million.
Other products like Letairis, Ranexa, AmBisome and Zydelig recorded sales of $226 million (up 18%), $210 million (up 24%), $94 million (up 27%) and $39 million (down 3%), respectively.
Research & development (R&D) expenses were up 59.5% to $1.2 billion. The increase was primarily due to overall development of the company’s clinical studies. Selling, general and administrative (SG&A) expenses were down 6.9% to $992 million.
Adjusted product gross margin was 88.1%, down from 89.8% in the year-ago period.
2016 Results
Revenues came in $30.4 billion, down from $32.6 billion in 2015. Earnings per share came in at $11.37, down from $12.44 in 2015 but beat the Zacks Consensus Estimate of $11.00.
2017 Guidance
Gilead expects net product sales in the range of $22.5–$24.5 billion. Non-HCV product sales are projected between $15 billion and $15.5 billion. HCV product sales are projected between $7.5 billion and $9.0 billion.
Adjusted R&D expenses and adjusted SG&A expenses are projected in the range of $3.1–$3.4 billion and $3.1–$3.4 billion, respectively.
Adjusted product gross margin is estimated in the range of 86–88%.
Dividend and Share Repurchase
Concurrently, Gilead declared an increase of 10% in the quarterly cash dividend from $0.47 per share to $0.52 per share, beginning in the first-quarter 2017. The dividend is payable on Mar 30 to stockholders of record at the close of business on Mar 16. In 2016, the company repurchased 123 million shares worth $11 billion. Gilead currently has $9 billion under its 2016 share repurchase authorization.
Although the fourth quarter results beat on both earnings and sales, the guidance for 2017 was quite disappointing. 2016 was a challenging year for the company. The HCV franchise continues to be under competitive and pricing pressure leading to a massive decline in Harvoni and Sovaldi sales. Higher discounts and payer mix continue to impact sales adversely. Total HCV treatment starts in the U.S. were an estimated 231,000 in 2016, approximately 25,000 less than 2015. The company expects a further decline in patients starts in 2017. We note that Harvoni, Sovaldi and Epclusa, face competition from AbbVie’s (ABBV - Free Report) Viekira Pak and Viekira XR and Bristol-Myers’ (BMY - Free Report) Daklinza among others.
On a positive note, Epclusa’s uptake has been encouraging while the HIV franchise maintains momentum driven by the rapid adoption of TAF-based regimens. By the end of 2016, the TAF-based regimens made up 37% of Gilead's HIV prescription volume in the treatment market. Strong uptake for Truvada for use in the pre-exposure prophylaxis setting should also boost sales. However, Gilead will lose exclusivity for Viread in 2017 in some countries outside the U.S. which should impact sales.
Sucampo’s earnings estimates were stable at $1.22 for 2016 but have increased from $1.58 to $1.74 for 2017 over the last 60 days. The company posted a positive earnings surprise in all of the four trailing quarters with an average beat of 35.5%.
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Gilead (GILD) Beats Q4 Earnings & Sales, View Disappoints
Gilead Sciences, Inc.’s (GILD - Free Report) fourth-quarter 2016 earnings (including the impact of stock-based compensation expenses) of $2.64 per share beat the Zacks Consensus Estimate of $2.31. However, earnings were down from $3.27 in the year-ago quarter.
Moreover, total revenue in the reported quarter came in at $7.3 billion, down 13.9% year over year. Nevertheless, quarterly revenues marginally beat the Zacks Consensus Estimate of $7.2 billion.
Shares of Gilead have underperformed the Zacks classified Medical-Biomedical and Genetics industry in the last one year with the stock losing 19.9% during this period, compared with the industry’s decline of 0.4%.
HCV Franchise Disappoints Again, HIV Impresses
Product sales came in at $7.2 billion, down 14.2% year over year. The decline was due to lower hepatitis C virus (HCV) sales, partially offset by higher sales across HIV and other therapeutic areas.
Antiviral product sales, which include Gilead's HIV and liver disease portfolios, came in at $6.6 billion in the fourth-quarter 2016, down 16.4%.
HCV product sales, which include Harvoni, Sovaldi and the recently launched Epclusa, were $3.2 billion, down 34.7%. The downside was mainly attributed to lower sales of Harvoni and Sovaldi, partially offset by sales of Epclusa (launched in 2016) across various locations.
Sales of Harvoni declined 51% year over year to $1.6 billion in the reported quarter. The decline was mainly due to lower sales in the U.S. (down 42.8% to 976 million) and Europe (down 38.2% to $363 million). Further, Sovaldi sales recorded a year-over-year decline of 65% to $541 million.
Epclusa garnered sales of $1.0 billion in the reported quarter, significantly higher than $640 million reported in the prior quarter. We note that Epclusa was launched in the U.S. and Europe in June and July, respectively.
Meanwhile, HIV and other antiviral product sales came in at $3.4 billion, up 13.3% year over year. The increase was primarily driven by continuous strong uptake of tenofovir alafenamide (TAF)-based products such as Genvoya, which generated sales of $563 million, up from $461 million in the prior quarter; Descovy, which recorded sales of $149 million, up from $88 million in the third quarter of 2016; and Odefsey, which registered sales of $155 million, up from $105 million in the year-ago period.
HIV treatments like Stribild and Complera/Eviplera declined while Viread was up 6% to $297 million). However, Atripla sales tanked 24% to $607 million, while Truvada sales fell 7% to $868 million.
Other products like Letairis, Ranexa, AmBisome and Zydelig recorded sales of $226 million (up 18%), $210 million (up 24%), $94 million (up 27%) and $39 million (down 3%), respectively.
Research & development (R&D) expenses were up 59.5% to $1.2 billion. The increase was primarily due to overall development of the company’s clinical studies. Selling, general and administrative (SG&A) expenses were down 6.9% to $992 million.
Adjusted product gross margin was 88.1%, down from 89.8% in the year-ago period.
2016 Results
Revenues came in $30.4 billion, down from $32.6 billion in 2015. Earnings per share came in at $11.37, down from $12.44 in 2015 but beat the Zacks Consensus Estimate of $11.00.
2017 Guidance
Gilead expects net product sales in the range of $22.5–$24.5 billion. Non-HCV product sales are projected between $15 billion and $15.5 billion. HCV product sales are projected between $7.5 billion and $9.0 billion.
Adjusted R&D expenses and adjusted SG&A expenses are projected in the range of $3.1–$3.4 billion and $3.1–$3.4 billion, respectively.
Adjusted product gross margin is estimated in the range of 86–88%.
Dividend and Share Repurchase
Concurrently, Gilead declared an increase of 10% in the quarterly cash dividend from $0.47 per share to $0.52 per share, beginning in the first-quarter 2017. The dividend is payable on Mar 30 to stockholders of record at the close of business on Mar 16. In 2016, the company repurchased 123 million shares worth $11 billion. Gilead currently has $9 billion under its 2016 share repurchase authorization.
Gilead Sciences, Inc. Price and EPS Surprise
Gilead Sciences, Inc. Price and EPS Surprise | Gilead Sciences, Inc. Quote
Our Take
Although the fourth quarter results beat on both earnings and sales, the guidance for 2017 was quite disappointing. 2016 was a challenging year for the company. The HCV franchise continues to be under competitive and pricing pressure leading to a massive decline in Harvoni and Sovaldi sales. Higher discounts and payer mix continue to impact sales adversely. Total HCV treatment starts in the U.S. were an estimated 231,000 in 2016, approximately 25,000 less than 2015. The company expects a further decline in patients starts in 2017. We note that Harvoni, Sovaldi and Epclusa, face competition from AbbVie’s (ABBV - Free Report) Viekira Pak and Viekira XR and Bristol-Myers’ (BMY - Free Report) Daklinza among others.
On a positive note, Epclusa’s uptake has been encouraging while the HIV franchise maintains momentum driven by the rapid adoption of TAF-based regimens. By the end of 2016, the TAF-based regimens made up 37% of Gilead's HIV prescription volume in the treatment market. Strong uptake for Truvada for use in the pre-exposure prophylaxis setting should also boost sales. However, Gilead will lose exclusivity for Viread in 2017 in some countries outside the U.S. which should impact sales.
Zacks Rank & Key Pick
Gilead carries a Zacks Rank #3 (Hold) stock.
A better-ranked stock in the health care sector is Sucampo Pharmaceuticals which currently sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sucampo’s earnings estimates were stable at $1.22 for 2016 but have increased from $1.58 to $1.74 for 2017 over the last 60 days. The company posted a positive earnings surprise in all of the four trailing quarters with an average beat of 35.5%.
Just Released – Driverless Cars: Your Roadmap to Mega-Profits Today
In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>