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

Zacks Equity Research

Biotech bigwig Gilead Sciences Inc. GILD develops drugs for the treatment of human immunodeficiency virus (“HIV”), liver diseases such as chronic hepatitis C virus (“HCV”) infection and chronic hepatitis B virus (“HBV”) infection, and cardiovascular, hematology/oncology and inflammation/respiratory diseases.

Gilead has shifted focus to the HIV franchise and newer avenues like CAR-T therapy due to a massive decline in HCV franchise sales. The company is a dominant player in the HIV market with an impressive portfolio for the same. The HIV franchise maintained momentum on strong uptake of Biktarvy in the previous quarter and it is expected to have continued in the to-be-reported quarter. Descovy-based regimens continue to perform well. Encouraging uptake of the drug for the pre-exposure prophylaxis (PrEP) setting is likely to have benefited the top line, further. However, stiff competition from Glaxo GSK is likely to have limited market share gains. The Zacks Consensus Estimate for sales of Genvoya and Biktarvy is projected at $859 million and $1.5 billion, respectively.

Moreover, during the fourth quarter, Gilead had four drugs — Vemlidy, Epclusa, Harvoni and Genvoya — included in China's national reimbursement drug list. Geographical expansion will enable broader access to these medicines in the region and boost sales.

However, during the last earnings call, Gilead stated that total product sales will decline sequentially in the first quarter, primarily driven by U.S. seasonal inventory patterns and buying patterns of public payers, which negatively impact payer mix. Sales are likely to have declined year over year primarily due to lower sales of cardiopulmonary products, Ranexa for Nexon and Letairis. Generic versions of Ranexa and Letairis were launched in the first and second quarters of 2019, respectively. Moreover, the coronavirus pandemic has resulted in supply-chain disruptions, which in turn might have impacted sales.

CAR-T therapy, Yescarta (axicabtageneciloleucel), generated $122 million in sales during the fourth quarter of 2019 and first-quarter sales are expected to have experienced a sequential increase, driven by a higher number of therapies provided to patients and its continued expansion in Europe. The Zacks Consensus Estimate for Yescarta sales for the first quarter stands at $136 million.

Investors will also focus on the company’s pipeline updates, particularly the experimental antiviral, remdesivir, for COVID-19. Currently, Gilead is conducting two phase III studies on remdesivir — the SIMPLE studies — in countries with a higher prevalence of COVID-19. An update on the studies is being keenly awaited by investors. Moreover, investors will look forward to guidance updates amid the coronavirus mayhem.

Gilead’s stock has gained 21.8% in the year so far compared with the industry's growth of 4.2%.

Gilead has a disappointing track record, with earnings beating estimates in two of the last four quarters and missing in the other two, the average negative surprise being 2.49%. In the last reported quarter, the company missed expectations by 22.62%. (Read more: Will Gilead Beat Q1 Earnings Despite Coronavirus Mayhem?).

Zacks Rank & Stocks to Consider

Gilead currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the sector include Vertex Pharmaceuticals VRTX and Biogen BIIB. While Vertex sports a Zacks Rank #1 (Strong Buy), Biogen carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Vertex’s earnings estimates are up 10 cents to $7.67 for 2020.

Biogen’s earnings estimates are up 16 cents to $32.61 for 2020.

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