Biotech giant Gilead Sciences’ (GILD - Analyst Report) earnings have cheered the equity markets yet again. Soaring sales of the company’s blockbuster drug Sovaldi have catapulted the company’s top and bottom line far beyond expectations.
Sovaldi was in the news recently as U.S. lawmakers raised concerns over the pricing of this new hepatitis C drug. This long-awaited drug, approved in December 2013, costs $1,000 per pill or $84,000 for a 12-week course to treat a hepatitis C patient (read: Inside the Wild Ride of Biotech ETFs).
Though the company’s shares have plunged roughly 15% from the high hit in late February following the pricing concern, its share prices have recovered 8% in the past 5 days.
This drug has enabled Gilead to report outstanding earnings results. While revenues have doubled, profits have tripled from the year-ago quarter (read: 3 ETFs Tumble Most on Biotech Sell-off).
Gilead Earnings in Focus
The company reported earnings per share of $1.33 for the first quarter of 2014, easily outpacing the Zacks Consensus Estimate of 75 cents and way above the year-ago earnings of 43 cents per share.
Moreover, total revenues for the reported quarter came in at $4.9 billion, beating our estimates by around 36%. Revenues from the company’s antiviral product sales jumped 119% to $4.5 billion, mainly led by solid Sovaldi sales.
The company generated nearly half of its revenues, or $2.7 billion, from the sale of Sovaldi during the reported quarter, beating an average of analyst estimates by more than $1 billion. Revenues from Sovaldi were almost triple the sales from the company’s next biggest drug, Atripla, which reported an 11% year-over-year fall.
Gilead has reiterated its full-year 2014 guidance and expects product sales to be between $11.3 billion and $11.5 billion, excluding the sales of Sovaldi and other hepatitis C drugs.
Amgen Earnings in Focus
While GILD cheered the markets, another biotech major, Amgen (AMGN - Analyst Report) , came out with disappointing results. The company reported revenues of $4.5 billion, missing our estimates by more than 4%.
Though adjusted earnings per share came in at $1.87, slightly above our estimates of $1.81, it dropped 5% year over year. Moreover, the company reported a 25% fall in net income due to a jump in production and research costs.
While the outstanding results by Gilead caused its share prices to gain 2.9% to $75.63 after market hours, AMGN shares declined 2.4% in after market hours.
Given the mixed results from the two major biotech companies, Gilead and Amgen, investors having exposure to the Health & Biotech ETF space must keep a close watch, and especially for these ETFs highlighted below:
Market Vectors Biotech ETF (BBH - ETF report)
This fund tracks the Market Vectors US Listed Biotech 25 Index, holding 26 securities in the basket with a tilt toward large cap and growth stocks. The product has so far amassed $505.3 million in its asset base while charging 35 bps in annual fees.
The duo, GILD and AMGN, together have more than 20% exposure in the fund.
The fund has gained 25% in the past one year and is up around 7% in the last week (see: all the Healthcare ETFs here).
iShares Nasdaq Biotechnology ETF (IBB - ETF report)
This fund provides exposure to 123 firms by tracking the Nasdaq Biotechnology Index. IBB is one of the most popular funds in the biotech space with AUM of $4.8 billion and annual fees of 48 bps.
AMGN occupies the top spot, while GLD occupies the fourth spot here with exposures of 8.9 % and 7.6%, respectively. The fund is quite heavily invested in its top 10 assets which form more than half of the fund's holdings.
The fund has gained around 8% in the past one week and is up 35% in the past one year.
Health Care Select Sector SPDR Fund (XLV - ETF report)
XLV is the most popular healthcare ETF on the market and tracks the S&P Health Care Select Sector Index. This fund manages about $9.3 billion in its asset base and charges an expense ratio of 16 basis points annually. In total, the fund holds about 55 securities in its basket (read: Solid JNJ Earnings Put Healthcare ETFs in Focus).
GLD and AMGN together have around 9% exposure in the fund. Pharma accounts for 46% share from a sector look while biotech, healthcare providers and services, and equipment and suppliers make up for double-digit exposure.
The fund gained nearly 2.8% in the past one week and is up 5% since the start of the year.
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