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Will HIV Franchise Sales Drive Gilead's (GILD) Q1 Earnings?

Biotech major Gilead Sciences Inc. GILD is slated to report first-quarter results on May 2, after the market closes.

Gilead has a mixed track record, with earnings beating estimates in two of the last four quarters. Overall, the company delivered an average positive earnings surprise of 1.99%. In the last reported quarter, the company’s earnings missed expectations by 15.3%.

Gilead’s stock has gained 4.2% in the year so far compared with the industry's growth of 4.5%.


Why a Likely Positive Surprise?

Our proven model indicates that Gilead is likely to beat on earnings this quarter, as it has the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to be able to beat estimates.

Earnings ESP: Earnings ESP for Gilead is +1.37%.  The Zacks Consensus Estimate is pegged at $1.61, while the Most Accurate Estimate is pegged at $1.63. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Gilead currently carries a Zacks Rank #2, which when combined with a positive ESP makes us confident of an earnings beat.

Note, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Likely to Impact Q1

For the first quarter of 2019, Gilead expects product sales to decline 12-14% sequentially, primarily owing to the U.S. seasonal inventory patterns and buying patterns of public payers that negatively impact payer mix.

While the company’s revenues in the last reported quarter beat estimates, the year-over-year decline was disappointing as the magnitude of decline in hepatitis C virus (HCV) sales continued to deepen.

Nevertheless, the HIV franchise is expected to maintain momentum. Strong HIV performance and other antiviral product sales are being driven by continued uptake of tenofovir alafenamide (“TAF”)-based products — Genvoya, Descovy and Odefsey. We expect the trend to continue in the first quarter as well. Genvoya has been listed as a preferred regimen in several HIV treatment guidelines.

Truvada, for use in the pre-exposure prophylaxis setting, continued to maintain momentum with an estimated 202,000 patients using the drug by the end of the fourth quarter. We expect the momentum to continue in the first quarter. The Zacks Consensus Estimate for sales of Genvoya and Descovy are projected at $1.2 billion and $408 million.

The FDA approval of Gilead’s once-daily single tablet regimen (“STR”), Biktarvy (bictegravir 50mg/emtricitabine 200mg/tenofovir alafenamide 25mg, BIC/FTC/TAF) for HIV-1 infection has boosted the portfolio.  This is expected to drive sales in the first quarter.

Apart from the regular top and bottom-line numbers in the to-be-reported quarter, we expect investors to focus on pipeline updates. The company also submitted a supplemental New Drug Application (sNDA) to the FDA for Descovy as pre-exposure prophylaxis (PrEP) to reduce the risk of sexually acquired HIV-1 infection among individuals, who are HIV-negative and at risk for HIV.

Gilead intends to foray into the non-alcoholic steatohepatitis (NASH) and inflammation market with late-stage candidates, selonsertib and filgotinib, respectively. However, the company suffered a setback with the failure of a late-stage study on NASH candidate, selonsertib.

Earlier in the month, the company announced a strategic collaboration with a privately-held, data-driven company, Insitro, for discovering and developing therapies targeting NASH. In addition, Gilead and Denmark-based pharma giant Novo Nordisk A/S NVO announced that both the companies intend to collaborate to develop treatments for NASH.

Moreover, the company and partner Galapagos NV announced encouraging interim safety information from four studies on experimental candidate, filgotinib, for the treatment of rheumatoid arthritis (RA).

Other Stocks to Consider

Here are some health-care stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Incyte Corp. INCY has an Earnings ESP of +14.47% and a Zacks Rank of 1. The company is scheduled to release first-quarter results on Apr 30, before the market opens. You can see the complete list of today’s Zacks #1 Rank stocks here.

GlaxoSmithKline plc GSK is scheduled to release results on May 1. The company has an Earnings ESP of +3.55% and a Zacks Rank #3.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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