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Gilead (GILD) Beats Q4 Earnings Estimates, Gives 2016 View

Gilead Sciences, Inc. 's GILD fourth-quarter 2015 earnings (including stock-based compensation expenses) of $3.27 per share surpassed the Zacks Consensus Estimate of $2.91. Reported earnings were also way above the year-ago figure of $2.38 per share.

Total revenue of $8.5 billion surged 16.3% from the year-ago figure. Moreover, quarterly revenues easily surpassed the Zacks Consensus Estimate of $8.1 billion.

Full-year earnings (including stock-based compensation expenses) grew to $12.44 per share from $7.91 a year ago, while revenues came in at $32.6 billion, up 31.1%.

Quarter in Detail

Product sales soared approximately 16.4% to $8.4 billion. Antiviral product sales for the quarter registered growth of 17.2% to $7.9 billion driven by the launch of hepatitis C virus (HCV) infection products in Japan and continued launches of HCV products across Europe.

Gilead's blockbuster HCV drug, Harvoni, recorded revenues of $3.3 billion in the fourth quarter of 2015, up 58.8% year over year. However, sales of Sovaldi, another HCV drug at Gilead, registered a 10.7% year-over-year plunge to $1.5 billion due to the availability of newer HCV therapies.

Nevertheless, other anti-viral products, such as HIV treatments Complera/Eviplera (up 9.2% to $380 million) and Stribild (up 32.7% to $511 million) performed well. Sales of older HIV drugs like Truvada (up 4.3% to $936 million) were also impressive. However, Atripla sales declined 13.5% to $800 million. Moreover, the company expects Atripla sales to continue declining. Viread sales were also down 1.6% to $306 million.

Other products including Letairis, Ranexa and AmBisome recorded sales of $192 million (up 6.1%), $169 million (up 17.4%) and $74 million (down 28.8%), respectively. Newly launched Zydelig also performed well, recording revenues of $40 million, up 11% sequentially.

Research & development (R&D) expenses (including stock-based compensation expenses) were down 12.3% to $757 million. Selling, general and administrative (SG&A) expenses (including stock-based compensation expenses) were up 24.9% to $1.1 billion.

2016 Guidance

Gilead provided its 2016 product sales guidance. The company expects product sales in the range of $30-$31 billion.

Adjusted product gross margin for 2016 is expected in the range of 88-90%. The company also provided its guidance for R&D expenses and SG&A expenses. R&D expenses (excluding stock-based compensation expenses and other special items) are projected in the range of $3.2-$3.5 billion, while SG&A expenses are expected to be $3.3 - $3.6 billion.

Dividend and Share Repurchase

The company also declared its first-quarter 2016 dividend. Gilead has declared a quarterly cash dividend of 43 cents per share of common stock, to be paid on Mar 30, 2016, to all stockholders of record as of the close of business on the record date of Mar 16, 2016.

Moreover, the company has repurchased shares worth $3.1 billion in the fourth quarter of 2015. Its board has also authorized an additional $12 billion share repurchase program to be initiated after the completion of the current $15 billion program, out of which $8 billion is remaining as on Dec 31, 2015. The repurchase of $5 billion shares is expected to be completed in the next three months.

Our Take

Gilead posted strong fourth-quarter results, with both earnings and revenues beating our expectations. We are nevertheless concerned about the slowdown in Harvoni sales. Pricing measures in the form of rebates and discounts could impact Harvoni sales further. The anticipated downtrend in Atripla sales due to newer HIV therapies is also concerning.

We note that several companies, including AbbVie Inc. ABBV , have launched their HCV treatments in the market. Late last month Merck & Co. Inc. MRK received FDA nod for HCV drug, Zepatier. Meanwhile several other companies are looking to bring their drugs to the market. Going forward, we expect investor focus to remain on Harvoni's performance. We also expect to see some merger & acquisition activities at the company as management has hinted that share repurchases could be reduced in the future due to acquisitions and other pipeline investments to drive long-term growth.

Gilead currently carries a Zacks Rank #3 (Hold). Anika Therapeutics Inc. ANIK is a better-ranked stock in the health care sector. It sports a Zacks Rank #1 (Strong Buy).

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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.


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

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