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Why Is Gilead (GILD) Down 2.9% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Gilead Sciences (GILD). Shares have lost about 2.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Gilead due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Gilead Q2 Earnings & Sales Beat, Sales Guidance Raised

Gilead reported better-than-expected results for the second quarter of 2019 on strong sales of Biktarvy. It also raised its sales guidance for 2019.

The company delivered earnings of $1.82 per share in the second quarter, declining from $1.91 a year ago but comfortably beating the Zacks Consensus Estimate of $1.74.

Total revenues of $5.68 billion easily surpassed the Zacks Consensus Estimate of $5.56 billion and were almost flat year over year.

HIV Franchise Sustains Momentum

Product sales came in at $5.6 billion, up 1.2% year over year.

HCV product sales plunged 15.8% to $842 million, due to competitive dynamics, including a decline in U.S. Medicare prices and lower patient starts. Epclusa sales came in at $493 million, down from $500 million in the year-ago quarter.

HIV product sales increased 8.1% year over year to $4 billion, driven by higher sales volume led by the continued uptake of Biktarvy. Sales of Biktarvy were $1.1 billion, up from $185 million in the year-ago quarter.

Genvoya generated sales of $980 million, down from $1.2 billion in the year-ago quarter. Descovy recorded sales of $358 million, down from $403 million in the year-earlier period, while Odefsey registered sales of $387 million, up from $385 million a year ago.

During the quarter, Biktarvy became the top-selling product in the United States. It is also the number one prescribed regimen for both treatment-naïve and switch patients. Overall, Descovy-based regimens continue to gain market share and now account for approximately 83% of Gilead's total U.S. treatment prescription volumes.

CAR-T therapy Yescarta (axicabtagene ciloleucel), launched in the United States in October 2017, generated $120 million in sales, up from $96 million in the last reported quarter, driven by an increase in the number of therapies provided to patients. Yescarta was also approved in Europe in August 2018.

Other product sales — chronic hepatitis B (HBV) drugs, cardiovascular, oncology and other categories (Vemlidy, Viread, Letairis, Ranexa, Zydelig and AmBisome) — were $604 million, down from $807 million in the comparable quarter last year, due to declines in Ranexa and Letairis sales after generic entries in 2019.

Adjusted product gross margin was 87.3% compared with 84.2% in the year-ago period. Research & development (R&D) expenses were relatively flat at $916 million. Selling, general and administrative (SG&A) expenses increased 20.8% to $1.01 billion.

2019 Guidance Updated

Based on favorable demand trends in the first half of 2019, Gilead raised its guidance for net product sales. The company now expects sales of $21.6-$22.1 billion compared with the previous guidance of $21.3-$21.8 billion. Adjusted R&D and adjusted SG&A expenses are projected to be $3.6-$3.8 billion and $3.9-$4.1 billion, respectively. Adjusted product gross margin is anticipated to be 85-87%.

Dividend and Share Repurchase

During the quarter, Gilead generated $2.2 billion in operating cash flow, repaid $500 million of debt, made dividend payout of $800 million and spent $588 million on share buybacks.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Gilead has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Gilead has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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