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Gilead (GILD) Beats on Q1 Earnings, Revenues Miss Estimates
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Gilead Sciences, Inc.’s (GILD - Free Report) first-quarter 2017 earnings (including the impact of stock-based compensation expenses) of $2.20 per share beat the Zacks Consensus Estimate of $2.18. However, earnings were down from $2.98 in the year-ago quarter.
Moreover, total revenue in the reported quarter was $6.5 billion, down 16.5% year over year and missed the Zacks Consensus Estimate of $6.7 billion.
Shares of Gilead 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 1.4%.
HCV Franchise Disappoints Again, HIV Impresses
Product sales came in at $6.4 billion, down 16.9% 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 $5.8 billion in the reported quarter, down 18.7%.
HCV product sales, which include Harvoni, Sovaldi and the recently launched Epclusa, were $2.6 billion, down 39.5%. The downside was mainly attributed to lower sales of Harvoni and Sovaldi across all major markets, partially offset by sales of Epclusa (launched in 2016) across various locations. Sales in the U.S. declined sequentially due to lower Epclusa sales, resulting in lower inventory along with some loss of market share as a result of increased competition.
Sales of Harvoni declined 54.5% year over year to $1.4 billion in the reported quarter. The decline was mainly due to lower sales in the U.S. Further, Sovaldi sales recorded a steep year-over-year decline of 75.4% to $313 million.
Epclusa garnered sales of $892 million in the reported quarter, lower than the $1.0 billion in the prior quarter. We note that Epclusa was launched in the U.S. and Europe in June and Jul 2016 respectively.
Meanwhile, HIV and HBV product sales came in at $3.3 billion, up 13.8% 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 $769 million, up from $563 million in the prior quarter, Descovy, which recorded sales of $251 million, up from $149 million in the prior quarter, and Odefsey, which registered sales of $227 million, up from $155 million in the prior quarter.
HIV treatments like Stribild and Complera/Eviplera and Viread sales declined. Atripla sales tanked 33% to $452 million, while Truvada sales fell 20.4% to $714 million.
Other products like Letairis, Ranexa, AmBisome and Zydelig recorded sales of $211 million (up 20.6%), $153 million (up 6%), $92 million (up 6.9%) and $35 million (down 28.5%), respectively.
Research & development (R&D) expenses declined 26.4% to $931 million due to the impact of up-front collaboration expenses in 2016 related to Gilead’s license and collaboration agreement with Galapagos NV and impairment charges related to in-process R&D. On the other hand, selling, general and administrative (SG&A) expenses were up 24% to $850 million due to higher branded prescription drug fee expense.
Adjusted product gross margin was 88.3%, up from 87.2% in the year-ago period.
2017 Guidance Reiterated
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 $3.1billion–$3.4 billion and $3.1billion–$3.4 billion, respectively. Adjusted product gross margin is estimated in the range of 86–88%. Earnings per share are projected around 84 cents – 91 cents.
Dividend and Share Repurchase
Concurrently, Gilead declared a cash dividend of 52 cents per share of common stock for second-quarter 2017. The dividend is payable on Jun 29 to stockholders of record at the close of business on Jun 16. During the first quarter, the company paid cash dividends of $687 million and repurchased 7.9 million shares of stock for $565 million.
Although the first quarter results beat on earnings, revenues missed expectations. The HCV franchise continues to be under competitive and pricing pressure leading to a massive decline in Harvoni and Sovaldi sales. The company expects that the persistent decline in HCV patient starts will be the primary factor behind the year-over-year decrease in revenues in 2017 along with increased competition which will impact patient share and pricing. This decline in patient starts is being driven by the evolving profile of patients that are in care. 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 and the drug is now launched in all the five major markets of Europe.
Meanwhile, the HIV franchise maintains momentum driven by the rapid adoption of TAF-based regimens. The TAF-based regimens now represent 42% of total Gilead HIV prescription volume following the launch of Genvoya and the launches of Odefsey and Descovy in 2016. Genvoya is now the company’s bestselling HIV product, surpassing both Truvada and Atripla since fourth-quarter 2016.
Strong uptake for Truvada for use in the pre-exposure prophylaxis setting should also boost sales as the company saw a significant uptick in PrEP usage in 2017 with an estimated 125,000 patients using Truvada by the end of the first quarter. 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 currently carries a Zacks Rank #2 (Buy). Another well placed stock in the healthcare sector is Infinity Pharmaceuticals, Inc. which currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Infinity’ loss estimates narrowed to $1.03 from $1.43 for 2017 over the past 60 days. The company recorded a positive earnings surprise in three of the last four quarters, the average being 36.64%.Its share price increased 43.7% year to date.
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Gilead (GILD) Beats on Q1 Earnings, Revenues Miss Estimates
Gilead Sciences, Inc.’s (GILD - Free Report) first-quarter 2017 earnings (including the impact of stock-based compensation expenses) of $2.20 per share beat the Zacks Consensus Estimate of $2.18. However, earnings were down from $2.98 in the year-ago quarter.
Moreover, total revenue in the reported quarter was $6.5 billion, down 16.5% year over year and missed the Zacks Consensus Estimate of $6.7 billion.
Shares of Gilead 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 1.4%.
HCV Franchise Disappoints Again, HIV Impresses
Product sales came in at $6.4 billion, down 16.9% 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 $5.8 billion in the reported quarter, down 18.7%.
HCV product sales, which include Harvoni, Sovaldi and the recently launched Epclusa, were $2.6 billion, down 39.5%. The downside was mainly attributed to lower sales of Harvoni and Sovaldi across all major markets, partially offset by sales of Epclusa (launched in 2016) across various locations. Sales in the U.S. declined sequentially due to lower Epclusa sales, resulting in lower inventory along with some loss of market share as a result of increased competition.
Sales of Harvoni declined 54.5% year over year to $1.4 billion in the reported quarter. The decline was mainly due to lower sales in the U.S. Further, Sovaldi sales recorded a steep year-over-year decline of 75.4% to $313 million.
Epclusa garnered sales of $892 million in the reported quarter, lower than the $1.0 billion in the prior quarter. We note that Epclusa was launched in the U.S. and Europe in June and Jul 2016 respectively.
Meanwhile, HIV and HBV product sales came in at $3.3 billion, up 13.8% 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 $769 million, up from $563 million in the prior quarter, Descovy, which recorded sales of $251 million, up from $149 million in the prior quarter, and Odefsey, which registered sales of $227 million, up from $155 million in the prior quarter.
HIV treatments like Stribild and Complera/Eviplera and Viread sales declined. Atripla sales tanked 33% to $452 million, while Truvada sales fell 20.4% to $714 million.
Other products like Letairis, Ranexa, AmBisome and Zydelig recorded sales of $211 million (up 20.6%), $153 million (up 6%), $92 million (up 6.9%) and $35 million (down 28.5%), respectively.
Research & development (R&D) expenses declined 26.4% to $931 million due to the impact of up-front collaboration expenses in 2016 related to Gilead’s license and collaboration agreement with Galapagos NV and impairment charges related to in-process R&D. On the other hand, selling, general and administrative (SG&A) expenses were up 24% to $850 million due to higher branded prescription drug fee expense.
Adjusted product gross margin was 88.3%, up from 87.2% in the year-ago period.
2017 Guidance Reiterated
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 $3.1billion–$3.4 billion and $3.1billion–$3.4 billion, respectively. Adjusted product gross margin is estimated in the range of 86–88%. Earnings per share are projected around 84 cents – 91 cents.
Dividend and Share Repurchase
Concurrently, Gilead declared a cash dividend of 52 cents per share of common stock for second-quarter 2017. The dividend is payable on Jun 29 to stockholders of record at the close of business on Jun 16. During the first quarter, the company paid cash dividends of $687 million and repurchased 7.9 million shares of stock for $565 million.
Gilead Sciences, Inc. Price and Consensus
Gilead Sciences, Inc. Price and Consensus | Gilead Sciences, Inc. Quote
Our Take
Although the first quarter results beat on earnings, revenues missed expectations. The HCV franchise continues to be under competitive and pricing pressure leading to a massive decline in Harvoni and Sovaldi sales. The company expects that the persistent decline in HCV patient starts will be the primary factor behind the year-over-year decrease in revenues in 2017 along with increased competition which will impact patient share and pricing. This decline in patient starts is being driven by the evolving profile of patients that are in care. 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 and the drug is now launched in all the five major markets of Europe.
Meanwhile, the HIV franchise maintains momentum driven by the rapid adoption of TAF-based regimens. The TAF-based regimens now represent 42% of total Gilead HIV prescription volume following the launch of Genvoya and the launches of Odefsey and Descovy in 2016. Genvoya is now the company’s bestselling HIV product, surpassing both Truvada and Atripla since fourth-quarter 2016.
Strong uptake for Truvada for use in the pre-exposure prophylaxis setting should also boost sales as the company saw a significant uptick in PrEP usage in 2017 with an estimated 125,000 patients using Truvada by the end of the first quarter. 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 currently carries a Zacks Rank #2 (Buy). Another well placed stock in the healthcare sector is Infinity Pharmaceuticals, Inc. which currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Infinity’ loss estimates narrowed to $1.03 from $1.43 for 2017 over the past 60 days. The company recorded a positive earnings surprise in three of the last four quarters, the average being 36.64%.Its share price increased 43.7% year to date.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think. See This Ticker Free >>