Gilead Sciences, Inc.
) fourth quarter 2012 earnings (excluding special items but
including stock option expense) of 47 cents per share beat the
Zacks Consensus Estimate of 45 cents. Better-than expected
earnings came on the back of higher revenues.
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The company's fourth quarter 2012 adjusted earnings came in line
with the year-ago earnings. We note that all earnings per
share figures have been adjusted to reflect the two-for-one stock
split, which took effect on Jan 25, 2013.
Revenues climbed 17.6% to $2.59 billion, beating the Zacks
Consensus Estimate of $2.43 billion. The increase in total
revenue was attributable to higher product sales. Foreign
exchange (Fx) fluctuations favorably impacted product sales by
For full year 2012, earnings came in at $1.73 per share, a penny
short of the Zacks Consensus Estimate and 6% below the year-ago
earnings. Full year earnings were hurt by higher costs.
Revenues increased 16% to $9.7 billion in 2012, beating the Zacks
Consensus Estimate of $9.5 billion. Higher product sales (up 16%
to $9.4 billion) drove revenues in 2012. Full year product sales
were above the company's guidance range of $9.1-$9.2 billion.
The Fourth Quarter in Details
Product sales climbed 18% to $2.51 billion, driven by anti-viral
products, such as Atripla (up 6% to $917.5 million), Truvada (up
12% to $832.7 million) and Viread (up 19% to $226.7 million).
Products sales were also aided by the launch of Complera/Eviplera
in 2011. Stribild - an HIV combination pill - launched in the US
in Aug 2012, contributed $40 million to total revenue in the
final quarter of 2012, up 128.6% sequentially.
Antiviral product sales for the quarter grew 17% to $2.17
billion. The US market contributed $1.26 billion (up 20%) to
antiviral product sales, while Europe contributed $743 million
(up 9%). Other products including Cayston and AmBisome liposome
recorded sales of $127.7 million (up 15%). Gilead's royalty,
contract and other revenues climbed 16% to $77.5 million.
On the operational front (excluding special items but including
stock option expense), operating margin climbed to 43.7% from
43.1% a year ago. Both research & development (R&D)
expenses (up 18% to $434.2 million) and selling, general and
administrative (SG&A) expenses (up 14.9% to $363.5 million)
were on the upswing during the quarter. The rise in R&D
expenses was primarily driven by Gilead's efforts to develop its
pipeline, whereas SG&A expenses increased primarily due to
the company's efforts to expand. Interest expenses too were on
the rise during the final quarter of 2012.
Apart from releasing its fourth quarter and full year financial
results, Gilead also provided guidance for 2013. The company
expects product revenue in the range of $10-$10.2 billion,
reflecting an increase of 6%-9% over 2012 levels.
Adjusted product gross margin for 2013 is projected in the range
of 74%-76%. Adjusted R&D expenses are guided in the range of
$1.8- $1.9 billion, well above 2012 levels. The increase is
attributable to Gilead's efforts to develop its pipeline.
SG&A expenses are forecasted in the range of $1.55-$1.65
billion. The guidance includes the increased costs expected to be
incurred pertaining to the potential 2014 launch of Gilead's
sofosbuvir for treating patients suffering from hepatitis C virus
Positive Results on sofosbuvir
Gilead also announced encouraging top-line results from 2 phase
III studies (FISSION and NEUTRINO) on HCV candidate, sofosbuvir.
The company intends to seek regulatory approvals for sofosbuvir
as a combination therapy in the second quarter of 2013.
Gilead, a biopharmaceutical company, currently carries a Zacks
Rank #4 (Sell). Biopharma stocks, such as
Peregrine Pharmaceuticals, Inc.
) are much more favorably placed and carry a Zacks Rank #1