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Gilead (GILD) Q1 Earnings & Sales Miss Estimates on Weak HCV


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Gilead Sciences, Inc . GILD reported dismal results for the first quarter of 2018 wherein both earnings and revenues missed expectations due to a wider-than-expected decline in the hepatitis C virus (HCV) franchise.

Consequently, the stock declined in after-market hours trading and is expected to open in the red given the expectation of a further decline in HCV franchise in 2018.  Gilead's stock has lost 1.7% in the last one month as against the industry' s  gain of 0.4%.

The company's first-quarter earnings of $1.48 per share missed the Zacks Consensus Estimate of $1.66. Earnings were also below the year-ago quarter figure of $2.23 per share.

Gilead Sciences, Inc. Price, Consensus and EPS Surprise

Gilead Sciences, Inc. Price, Consensus and EPS Surprise | Gilead Sciences, Inc. Quote

Moreover, total revenues of $5.1 billion also missed the Zacks Consensus Estimate of $5.42 billion. Further, revenues declined 21.8% year over year.

Harvoni & Sovaldi Plunge Further

Product sales came in at $5.0 billion, down 21.6% year over year due to accelerated decline in HCV sales.

Antiviral product sales, which include Gilead's HIV and liver disease portfolio, came in at $4.4 billion in the quarter, down 24.1% from the year-ago quarter.

Research & development (R&D) expenses declined 8.4% to $814 million. Selling, general and administrative (SG&A) expenses increased 9.5% to $884 million.
HCV product sales, which include Harvoni, Sovaldi, Epclusa and Vosevi, were $1.0 billion, down from $2.6 billion reported in the year-ago quarter. The downside was mainly due to lower sales of Harvoni and Sovaldi across all major markets and lower sales of Epclusa in the United States as a result of increased competition.

Sales of Harvoni plunged 74.7% year over year to $348 million in the quarter.  Epclusa garnered sales of $536 million in the quarter, down from the year-ago period figure of $892 million.

Meanwhile, HIV and HBV product sales came in at $3.3 billion, up 1.9% year over year. The increase was primarily driven by continuous strong uptake of tenofoviral afenamide (TAF)-based products such as Genvoya, which generated sales of $1,082 million, up from $769 million in the year-ago quarter, Descovy, which recorded sales of $361 million, up from $251 million, and Odefsey, which registered sales of $342 million, up from $227 million. Entry of generics and greater U.S. inventory drawdown than in the prior-year quarter somewhat impacted sales. However, HIV treatments like Stribild and Complera/Eviplera sales declined 43.7% and 24.9% respectively. Viread sales were down at $97 million, down 62.7%.

Atripla sales tanked 30.5% to $314 million, while Truvada sales fell 8.7% to $652 million.

Other products like Letairis, Ranexa, AmBisome and Zydelig recorded sales of $204 million (down 3.3%), $195 million (up 27.4%), $107 million (up 16.3%) and $33 million, respectively. Adjusted product gross margin was 86.3% compared to 88.3% in the year-ago period.

2018 Guidance Reiterated

Gilead continues to expect net product sales in the range of $20-$21 billion. Adjusted R&D expenses and adjusted SG&A expenses are projected in the range of $3.4-$3.6 billion and $3.4-$3.6 billion, respectively. Adjusted product gross margin is expected in the range of 85-87%.

Acquisitions

The company acquired Kite Pharma in 2017. The FDA approval for Yescarta, a CAR-T therapy for the treatment of adult patients with relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy should Gilead's prospects. The company also acquired Cell Design Labs to expand further in the CAR-T space.

Yescarta sales came in at $40 million in the quarter.

Dividend and Share Repurchase

Gilead declared a cash dividend of 57 cents per share of common stock for second-quarter 2018. The dividend is payable on Jun 28 to stockholders of record at the close of business on Jun 15. During the quarter, the company paid cash dividends of $253 million and repurchased shares for $1.0 billion.

Our Take

Gilead's first-quarter results were disappointing with the company's both earnings and sales missing estimates as the magnitude of the decline in HCV sales was wider-than-expected. The HCV franchise is under tremendous pressure due to lower patient starts and increasing competition.

We expect sales to decline further going forward.  We note that Harvoni, Sovaldi and Epclusa, face competition from AbbVie's ABBV Viekira Pak and Viekira XR, and Merck's MRK Zepatier.

While pricing has largely stabilized, market share will stabilize by mid-2018 while patient starts are expected to decline further.

Meanwhile, the HIV franchise maintains momentum driven by the rapid adoption of Descovy-based regimens.  The approval of Biktarvy in Feb 2018 by the FDA has further widened the portfolio. Biktarvy sales came in at $35 million in the quarter. In March, Biktarvy was added to the U.S. DHHS guidelines for the use of antiretroviral agents in adults and adolescents living with HIV as one of the recommended initial regimens. The CHMP has also adopted a positive opinion on the Marketing Authorization Application for Biktarvy in the EU and Gilead expects to obtain approval for the same in the third quarter which will further solidify its portfolio. Truvada for use in the pre-exposure prophylaxis setting continued to maintain momentum with an estimated 167,000 patients using Truvada by the end of the first quarter.

Given the persistent decline in HCV sales, the company is looking to newer avenues to help its top-line. Gilead is looking to solidify its presence in the gene therapy space. The initial uptake of Yescarta is also encouraging. During the first quarter, Gilead announced an agreement with Sangamo Therapeutics, Inc. SGMO to use Sangamo's zinc finger nuclease technology platform for the development of next-generation ex vivo cell therapies in oncology. Gilead is also intending to foray into the NASH market with pipeline candidates- selonsertib and filgotinib. Both the candidates are being evaluated in late stage studies and a tentative approval will diversify Gilead's portfolio.

Zacks Rank

Gilead currently carries a Zacks Rank #2 (Buy).  You can see   the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: MRK , ABBV , GILD , SGMO


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