Biotech darling Gilead to pale in comparison to previous quarters: Estimize
The earnings parade continues this week, with over 150 companies from the S&P 500 reporting. Several hail from the health care sector, including highly anticipated results from Gilead Sciences and Humana.
Gilead Sciences (GILD), long a darling in the biotech space, releases Q2 results on Tuesday after-the-bell. Estimize is looking for EPS of $2.78, denoting year-over-year growth of 18%, and much higher than Wall Street’s estimate of $2.64. Revenues are expected to come in at $7.54B, also above the Street’s $7.36B.
Despite expected profit growth of 18%, this pales in comparison to the past 5 quarters which have all yielded triple-digit growth. Gilead Sciences successful Hepatitis C franchise, comprised of the drugs Slovaldi and Harvoni, are responsible for strong fundamentals.
However, the pop drugmakers see from new drugs often wanes after the first two quarters following an approval. Slovaldi was introduced in late 2013 and Harvoni in late 2014, meaning massive profits realized from those two names may be tapering. The high price of these drugs have also come into question, with Gilead having to make price concessions for those insurers willing to carry the drugs.
In addition to updates on the Hepatitis C franchise, investors will also be eager to hear any news regarding acquisition targets. Last quarter the CEO, John Martin, said the company was taking suggestions on who to buy.
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Humana (HUM) will also be reporting this week, and revisions for EPS have moved down sharply. Estimize is looking for EPS of $1.97 vs. Wall Street’s $1.86. The Estimize consensus has fallen 12 cents since Friday morning, in response to a warning from the insurer that hospital costs for their senior citizen members were higher than initially anticipated and would eat into Q2 profits.
The other big news of course is Aetna’s (AET) bid to acquire Humana for $37B. As health insurers scramble to consolidate in the wake of the federal Affordable Care Act approval as a way to diversify and cut costs, Aetna and Humana were first to the table, followed by Anthem (ANTM) and Cigna (CI) which just disclosed the former would acquire the latter for $54B, with only UnitedHealth Group (UNH) left. This has reduced the number of big insurance companies to 3 from 5.
The Humana/Aetna merger came about as the two hoped being the first big insurers to combine would give them an edge in reviews by antitrust regulators.
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