The Wonder Drug That Will Quadruple Gilead’s 3rd Quarter Profits
Estimize | Oct 28, 2014 05:07AM ET
Gilead Sciences (NASDAQ:GILD)) is set to report earnings for its 3rd quarter of 2014 after the market closes on Tuesday October 28. At the beginning of this year GIlead began selling its new treatment for Hepatitis C, Sovaldi, in one of the most successful drug launches of all time.
In the first 6 months of the year alone Gilead sold over $5 billion worth of Sovaldi, making it the fastest drug to ever reach blockbuster sales status (more than $1 billion). It’s on such a trajectory that it could even become the top selling medication of the year in its first year available.
Sovaldi sells for $1000 a pill and helped push Gilead to a colossal earnings beat last quarter. After the close today analysts will be looking to see a strong follow-through from Sovaldi, but will also be eager to hear from management about the progress of Gilead’s second generation Hepatitis C drug, Harvoni.
Harvoni is a medication that combines Sovaldi with ledipasvir, another drug made by Gilead. Like Sovaldi, Harvoni does not come cheap. A 12 week treatment program runs about $95,000. That’s slightly more than the cost of Sovaldi over the same period, but Sovaldi can not used independently. Harvoni provides a cheaper combined treatment than the options which previously existed for Sovaldi.
Gilead just won an FDA approval to sell Harvoni earlier this month, so it won’t show up in Q3 earnings. But investors will be looking to management to give a projection on Harvoni and estimate how successful they believe the new substance will be. In the meantime, Sovaldi should have plenty of wind in its sails to carry the company through 3rd quarter earnings.
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According to the World Health Organization, roughly 3% of the world’s population is living with the Hepatitis C infection. That’s why it’s no surprise that Sovaldi has been so successful. Last quarter there was a large range of estimates for Gilead on Estimize, signaling uncertainty among investors. Gilead came out and ripped the cover off the ball reporting earnings of $2.36 per share compared to the Estimize consensus of $1.94 while Wall Street was forecasting $1.80.
For the third quarter we are seeing an even larger range of estimates as displayed by the blue box above. That means that investors disagree about whether or not Sovaldi can continue pushing Gilead’s earnings higher or if profits will stumble.
One of the interesting things about Gilead is that before the launch of its Hepatisis C drugs revenue growth was hovering around 15% on a year over year basis. On its 2 most recent quarters the pharmaceutical company recorded sales growth of 97% and 146% respectively. This quarter contributing analysts on Estimize except Gilead to up the pace and increase sales by a staggering 159% compared to the same quarter of last year.
Before the launch of Sovaldi profits at Gilead were stable near 50 cents per share each quarter. Since the launch of Sovaldi at the start of the year those numbers have been launched into orbit. This quarter the Estimize community has come to a consensus expectation for Gilead to come 1 penny shy of quadrupling its earnings from the third quarter of last year.
Much like Facebook Inc (NASDAQ:FB) which also reports after the close today, Gilead Sciences is a hot stock with sky high expectations to live up to. Sovaldi should net the company huge profits this quarter, and we should learn from management what type of impact to expect from Harvoni over the next 3 months.
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