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Why Is Gilead Sciences (GILD) Down 7.2% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for Gilead Sciences, Inc. (GILD - Free Report) . Shares have lost about 7.2% n that time frame.

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

Gilead Q1 Earnings & Sales Miss Estimates on Weak HCV

Gilead reported dismal results for the first quarter of 2018 wherein both earnings and revenues missed expectations due to a wider-than-expected decline in the hepatitis C virus (HCV) franchise.

The company’s first-quarter earnings of $1.48 per share missed the Zacks Consensus Estimate of $1.66. Earnings were also below the year-ago quarter figure of $2.23 per share.

Moreover, total revenues of $5.1 billion also missed the Zacks Consensus Estimate of $5.42 billion. Further, revenues declined 21.8% year over year.

Harvoni & Sovaldi Plunge Further

Product sales came in at $5.0 billion, down 21.6% year over year due to accelerated decline in HCV sales.

Antiviral product sales, which include Gilead's HIV and liver disease portfolio, came in at $4.4 billion in the quarter, down 24.1% from the year-ago quarter.

Research & development (R&D) expenses declined 8.4% to $814 million. Selling, general and administrative (SG&A) expenses increased 9.5% to $884 million.

HCV product sales, which include Harvoni, Sovaldi, Epclusa and Vosevi, were $1.0 billion, down from $2.6 billion reported in the year-ago quarter. The downside was mainly due to lower sales of Harvoni and Sovaldi across all major markets and lower sales of Epclusa in the United States as a result of increased competition.

Sales of Harvoni plunged 74.7% year over year to $348 million in the quarter.  Epclusa garnered sales of $536 million in the quarter, down from the year-ago period figure of $892 million.

Meanwhile, HIV and HBV product sales came in at $3.3 billion, up 1.9% year over year. The increase was primarily driven by continuous strong uptake of tenofoviral afenamide (TAF)-based products such as Genvoya, which generated sales of $1,082 million, up from $769 million in the year-ago quarter, Descovy, which recorded sales of $361 million, up from $251 million, and Odefsey, which registered sales of $342 million, up from $227 million. Entry of generics and greater U.S. inventory drawdown than in the prior-year quarter somewhat impacted sales. However, HIV treatments like Stribild and Complera/Eviplera sales declined 43.7% and 24.9% respectively. Viread sales were down at $97 million, down 62.7%.

Atripla sales tanked 30.5% to $314 million, while Truvada sales fell 8.7% to $652 million.

Other products like Letairis, Ranexa, AmBisome and Zydelig recorded sales of $204 million (down 3.3%), $195 million (up 27.4%), $107 million (up 16.3%) and $33 million, respectively. Adjusted product gross margin was 86.3% compared to 88.3% in the year-ago period.

2018 Guidance Reiterated

Gilead continues to expect net product sales in the range of $20-$21 billion. Adjusted R&D expenses and adjusted SG&A expenses are projected in the range of $3.4-$3.6 billion and $3.4-$3.6 billion, respectively. Adjusted product gross margin is expected in the range of 85-87%.

Acquisitions

The company acquired Kite Pharma in 2017. The FDA approval for Yescarta, a CAR-T therapy for the treatment of adult patients with relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy should Gilead’s prospects. The company also acquired Cell Design Labs to expand further in the CAR-T space.Yescarta sales came in at $40 million in the quarter.

Dividend and Share Repurchase

Gilead declared a cash dividend of $0.57 per share of common stock for second-quarter 2018. The dividend is payable on Jun 28 to stockholders of record at the close of business on Jun 15. During the quarter, the company paid cash dividends of $253 million and repurchased shares for $1.0 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been seven revisions lower for the current quarter.

Gilead Sciences, Inc. Price and Consensus

 

Gilead Sciences, Inc. Price and Consensus | Gilead Sciences, Inc. Quote

VGM Scores

At this time, GILD has a poor Growth Score of F. Its Momentum is doing a bit better with a D. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

The company's stock is suitable solely for value based on our styles scores.

Outlook

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




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