The drop after-hours may be more to do with Obama authorizing airstrikes in Iraq.
but it seems to be negative on Gilead today and hurting stock price....i'm not liking the action after hours.
lowering the price by 30% does seem like a reasonable estimate, but if you consider that Sovaldi's gross margin is a whopping 90%, and that there will be 3 or 4 competitors coming to into the market (who would gladly take 50% GM)....the price may be lowered by much more than 30%...JMHO.
If you go back to 4th quarter 2013, GILD earned $0.55. Last quarter, it's $2.36, which means Sovaldi makes up around 77% of GILD's earnings. That's a big big chunk. It seems investors are waiting to see how competition will affect earnings.
A Morningstar article states:
"Gilead saw $6.5 billion in revenue in the quarter, with $3.5 billion from Sovaldi alone. This pushed non-GAAP gross margin to 88.7% and operating margin to 71.9% in the second quarter, as Sovaldi likely sees gross margins near 90%, and Gilead's overall operating expenses are growing more slowly than revenue."
GILD earned $3.66 billion (or $2.20 per share) so at 90% gross of $3.5 billion in sales would mean $3.15 billion of the $3.66 was earned by Sovaldi.
If competition comes and reduces Sovaldi's gross margin to 50% (worse case scenario) then this quarter GILD would have earned $2.26 billion or $1.36 per share. What do you think?
The percentage of the $2.20 earnings belong to Sovaldi alone? I know Sovaldi sales was $3.48 billion out of the $6.41 billion total, but I'm looking for percentage of the earnings. Anybody know?
Looks like no breakout before earnings. Need to go thru 90.56 for that to happen.
no, I don't think this is old news (even though it does sound like it). From my understanding, previously, there was a letter calling for the gov't to look into the Gilead's pricing. The gov't has never contacted Gilead DIRECTLY until today.
Thanks for the link Hew. Anybody know the possible outcome from this? Has there ever been a case where the gov't was successful in forcing a drug company to re-price?
I'm out for now too. I think this letter is significant because it is addressed directly to Gilead. And Gilead will now have to respond. They will have to address this at their earnings conference call too.
After a long hard battle at the 83.01 ± 1.16 range, GILD finally broke thru last week and has now quickly moved up almost 7% (breakout). There is now resistance forming at 87.79 ± 1.23, type Single, strength 2. GILD came close today, but was not able to break this resistance. Even if she breaks this area, I suspect there will be heavier resistance at the $90 area. It's doubtful she can break this area before earnings. After earnings...it's anybody's call.