Gilead Posts Weak Earnings; Stock Falls 4% After Hours
Zacks Investment Research | Oct 29, 2014 02:29AM ET
Research-based biopharmaceutical juggernaut, Gilead Sciences (NASDAQ:GILD) announced its financial results for fiscal Q3 2014 after the market closed on Tuesday. The company’s total revenues for the third fiscal quarter of 2014 rose to $6.04 billion, as opposed to the Q3 2013s relatively paltry $2.78 billion in total revenue.
Net income for Q3 was $2.73 billion, or $1.67/diluted share, which was considerably better than $788.6 million or 47 cents/diluted share for Q3 last year. GILD posted $1.84 EPS for the quarter, which was better than the Zacks Consensus Estimate of $1.64 in EPS (after non-recurring items). GILD currently trades at around $108.6/share in after hours trading, which is down by about -4.3% from the market closing price. GILD had previously, during regular trading, made new highs, striking an all time high of $114.13/share.
Product sales totaled approximately $5.97 billion for Q3, however, sales of GILD’s high-end Hepatitis C virus treatment slipped below Wall Street’s estimates of $2.97 billion, reporting only $2.80 billion in sales. This can be partially blamed on GILD’s new combination and improved once-a-day pill, Harvoni, which has already been approved by the FDA earlier this month.
GILD claims that Harvoni will be cheaper than Sovaldi, which is likely true, given that it will truncate the duration of the treatment, which will translate into cheaper costs than Sovaldi. Sovaldi costs about $1,000/pill, or $84,000 for the regular 12-week course of treatment, in conjunction with other drugs.
Harvoni will be priced at a hefty $1,125/pill, or $94,500 for a 12-week course treatment, however there will not be a need for patients to use it along with other drugs, and the success rate of Harvoni will be better than Sovaldi’s already excellent rate. Many expect that the majority of patients will be able to take Harvoni for only eight weeks, rendering the cost to about $63,000.
U.S product sales for the third quarter of 2014 increased to $4.21 billion, from $1.67 billion, and Europe product sales increased to $1.44 billion from $823.6 million compared to last year’s Q3. The following charts are a quick display of how antiviral products sales have been faring. Antiviral products increased by $5.54 billion for Q3 2014, far better than $2.33 from the same quarter last year, thanks to sales of Sovaldi. Cardiovascular product sales also increased to $278.9 million, up from $250.9 million from last year’s Q3.
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Many investors blame higher operating costs to be hindering GILD’s performance, and GILD’s research and development expenses totaled $586.3 million, far higher than Q3 2014’s $488.5 million. However Non-GAAP selling, general, and administrative costs were truly disappointing, as they more than doubled year/year to $888.3 million in Q3 2014.
GILD, however, has witnessed considerable growth in HIV drugs such as Viread, Complera/Eviplera, and Stribild, which all managed to hit double-digit year/year sales increases, with Stribild’s revenue jumping 128% from Q3 2013. Higher operating costs will not hold GILD back from growing and beating analysts’ expectations, especially when GILD signs blockbuster deals for Harvoni in the international market in 2015.
The payment of $337 million ($0.21/diluted share) for the branded prescription drug fee imposed by the Affordable Care Act must also be taken into consideration for this quarter’s sluggish results. Expansion of clinical studies and the launch of Sovaldi, and the chronic lymphocytic leukemia drug, Zydelig have also run operating costs, and that must be taken into account.
Round Up
Although GILD will tumble off of its 52-week highs in the near term, the stock could have some long term promise thanks to the upcoming international release of Harvoni. Still, it is worth noting that GILD is currently a Zacks Rank #3 (Hold), so earnings estimate activity has been mixed as of late.
Other biomedical stocks to consider would be Illumina Inc. (NASDAQ:ILMN), or Biogen Idec (NASDAQ:BIIB). Both sport a Zacks Rank #1 (Strong Buy), and are likely to pay off very well as growth stocks for the patient investor. The following is a comparison graphic showing GILD’s stellar performance versus the S&P 500 Index.
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