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Why Is Gilead (GILD) Down 1.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Gilead Sciences (GILD - Free Report) . Shares have lost about 1.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Gilead due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Gilead Tops Q4 Earnings & Sales on Strong Veklury Demand

Gilead reported earnings of $2.19 per share in the quarter under review, which beat the Zacks Consensus Estimate of $2.15 and grew from $1.10 in the year-ago quarter.

Total revenues of $7.4 billion beat the Zacks Consensus Estimate of $7.11 billion and increased 26% from the year-ago quarter mainly owing to incremental sales of Veklury.

Quarter in Detail

Total product sales increased 26% to $7.3 billion for the fourth quarter of 2020. Excluding Veklury (remdesivir), product sales decreased 7% year over year to $5.4 billion, due to the continued effects of COVID-19 on its HIV and hepatitis C virus (HCV) franchises, as well as the expected decline in sales of Truvada due to the loss of exclusivity in the United States.

HIV product sales decreased 7% to $4.2 billion due to the loss of exclusivity of Truvada and Atripla in the United States in October 2020, partially offset by the continued patient uptake of Biktarvy and growth of Descovy for PrEP.  Biktarvy sales grew to $2 billion from $1.6 billion in the year-ago quarter as market share continues to grow in the United States. Growth in Descovy also boosted the top line as sales jumped to $478 million from $437 million. Genvoya generated sales of $852 million, down from $958 million in the year-ago quarter.  Truvada sales plunged to $146 million from $768 million in the year-ago quarter.

HCV product sales decreased 33% to $423 million driven by lower patient starts in the United States and Europe.

Cell Therapy product sales, which include Yescarta (axicabtagene ciloleucel) and Tecartus (brexucabtagene autoleucel) revenues, increased 34% to $163 million, driven by the continued uptake and expansion of Yescarta in Europe. Tecartus was approved by the FDA during the third quarter of 2020.

Veklury generated revenues of $1.9 billion in the quarter, reflecting higher hospitalization and treatment rates due to the most recent COVID-19 surge. The FDA granted full approval to Veklury for the treatment of patients with COVID-19 and the European Commission (EC) granted conditional Marketing Authorization to the same. It was earlier granted an Emergency Use Authorization (“EUA”) by the FDA.

Trodelvy generated $49 million in sales in the United States, following the acquisition of Immunomedics on Oct 23, 2020. The acquisition of Immunomedics added Trodelvy to Gilead’s portfolio. Trodelvy was granted accelerated approval by the FDA in April for the treatment of adult patients with metastatic triple-negative breast cancer (“mTNBC”) who have received at least two prior therapies for metastatic disease.

Other product sales increased 7% to $498 million.

Adjusted product gross margin was 87.5% compared with 75.6% in the year-ago period. Research & development (R&D) expenses came in at $1.5 billion, up from $1.1 billion in the year-ago quarter.

2020 Results

Gilead generated sales of $24.7 billion, up 10% from 2019 due to the launch of Veklury in 2020 and beat the Zacks Consensus Estimate of $24.5 billion. Earnings per share of $7.09 were up from $6.13 in 2019 on higher revenues and beat the Zacks Consensus Estimate of $7.04.

2021 Guidance

Product sales are projected around $23.7-$25.1 billion. Veklury sales are expected to be in the range of $2-$3 billion. Earnings per share are expected in the range of $6.75-$7.45. The Zacks Consensus Estimate for sales and earnings per share is pegged at $24 billion and $7.15 respectively.

Other Updates

Gilead and partner Galapagos agreed to amend the existing arrangement for the commercialization and development of Jyseleca. Gilead will not pursue FDA approval for Jyseleca for rheumatoid arthritis in the United States.

Gilead announced that it will acquire a private, commercial stage German-based biotechnology company, MYR GmbH for €1.2 billion in cash.

Gilead announced a collaboration and license agreement with Gritstone Oncology, Inc. to research and develop a vaccine-based immunotherapy as part of Gilead’s efforts to find a curative treatment for HIV infection.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 8.18% due to these changes.

VGM Scores

Currently, Gilead has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Gilead has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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