Gilead Sciences, Inc.
) third quarter 2013 earnings (excluding special items) of 50
cents per share surpassed the Zacks Consensus Estimate by 3 cents
and the year-ago earnings by 2 cents. The earnings beat at Gilead
was due to higher-than-expected revenues.
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Revenues climbed 15% to $2.78 billion, edging past the Zacks
Consensus Estimate of $2.74 billion. The increase in total
revenue was attributable to higher product sales. Key antiviral
products at Gilead performed very well during the third quarter
of 2013. Foreign exchange fluctuations adversely impacted product
sales by $17.5 million during the third quarter of 2013.
The Third Quarter in Details
Product sales climbed 15% to $2.71 billion, driven by anti-viral
products, such as Viread (up 6% to $231.6 million),
Complera/Eviplera launched in 2011 (up 112% to $210.7 million),
Truvada (up 3%) and Atripla (up 1%). Stribild - an HIV
combination pill - launched in the U.S. and the EU in Aug 2012
and May 2013 respectively, contributed $143.9 million to total
revenue in the third quarter of 2013, up 45% sequentially driven
by strong demand.
Antiviral product sales for the quarter grew 14% to $2.33
billion. The U.S. market contributed $1.39 billion (up 19%) to
antiviral product sales, while Europe contributed $750 million
(up 6%). Other products including Letairis, Ranexa and AmBisome
recorded sales of $135.1 million (up 28.5%), $115.8 million (up
21.8%) and $97.8 million (up 11.8%), respectively. Gilead's
royalty, contract and other revenues climbed 31.1% to $110.1
On the operational front (excluding special items but including
stock option expense), operating margin declined to 43% from
46.3% a year ago. Research & development (R&D) expenses
climbed 26.9% to $516.3 million in the third quarter of 2013
while selling, general and administrative (SG&A) expenses
surged 29.5% to $409.9 million. The rise in R&D expenses was
primarily driven by Gilead's efforts to develop its pipeline. The
increase in SG&A expenses was primarily attributable to
Gilead's efforts to expand. Costs associated with the anticipated
launch of Gilead's high potential late-stage hepatitis C virus
(HCV) candidate, sofosbuvir, also pushed up SG&A expenses.
The HCV candidate is under review both in the U.S. (target date:
Dec 8, 2013) and the EU. An advisory panel of the FDA recommended
the approval of sofosbuvir earlier this month. Gilead is highly
optimistic about the potential of sofosbuvir. We too expect
sofosbuvir to be approved in the U.S. in December.
Interest expenses declined during the third quarter of 2013 due
to the maturity of the convertible senior notes (due in May 2013)
and repayment of $850 million worth of bank debt issued
pertaining to Gilead's purchase of Pharmasset Inc. in 2012.
2013 Projection Adjusted
Gilead updated its guidance for 2013. The company now expects
product revenue in the range of $10.3-$10.4 billion (old
guidance: $10-$10.2 billion).
Adjusted product gross margin for 2013 is still projected in the
range of 74%-76%. R&D expenses (excluding stock based
compensation expenses and other special items) are now projected
in the range of $1.95-$2 billion (old guidance: $1.8-$1.9
billion). SG&A expenses projection have been reduced to the
range of $1.5-$1.55 billion from $1.55-$1.65 billion.
Gilead currently carries a Zacks Rank #4 (Sell). Currently,
AMAG Pharmaceuticals, Inc.
Isis Pharmaceuticals, Inc.
) look well positioned. All 3 are Zacks Rank #1 (Strong Buy)