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Gilead (GILD) Misses on Q2 Earnings & Sales, Ups '20 Guidance

Shares of Gilead Sciences, Inc. GILD are trading down in pre-market hours after it reported disappointing results for the second quarter of 2020, wherein it missed both earnings and sales estimates.  However, the company lifted its annual guidance probably to account for sales from its antiviral drug, remdesivir, for COVID-19.

Nevertheless, Gilead’s stock has gained 11.3% in the year so far compared with the industry's growth of 5.2%.

 

The company reported earnings of $1.11 per share in the quarter under review, which missed the Zacks Consensus Estimate of $1.46 and declined from $1.72 in the year-ago quarter.

Total revenues of $5.143 billion missed the Zacks Consensus Estimate of $5.3 billion and decreased from $5.685 billion in the year-ago quarter.

Quarter in Detail

Total product sales decreased 10% to $5.1 billion for the second quarter of 2020 due to lower sales volume of chronic hepatitis C virus (“HCV”) products as a result of the COVID-19 pandemic, which led to fewer healthcare provider visits and screenings.  

HIV product sales decreased 1% to $4.0 billion for the second quarter of 2020 due to lower sales volume of Truvada (emtricitabine [FTC] and tenofovir disoproxil fumarate [TDF])-based products. Moreover, the reversal of the pull forward of revenues into the first quarter due to COVID-19 also had a negative impact on the revenues. Truvada sales plunged to $387 million from $718 million in the year-ago quarter. Nevertheless, Biktarvy maintained momentum with sales of $1.6 billion, up from $1.1 billion in the year-ago quarter.

Genvoya generated sales of $816 million, down from $980 million in the year-ago quarter. Descovy recorded sales of $417 million, up from $358 million in the year-earlier period, while Odefsey sales were $382 million, down from $387 million a year ago.

HCV product sales decreased 47% to $448 million due to lower sales volume, driven by lower patient starts in the United States and Europe.

CAR-T therapy, Yescarta (axicabtageneciloleucel), generated $156 million in sales, up from $120 million a year ago, driven by its continued expansion in Europe. Sales also grew from $140 million in the previous quarter.

Sales from Letairis and Ranexa declined to $80 million and $1 million due to generic entries in 2019.

Adjusted product gross margin was 84.3% compared with 87% in the year-ago period. Research & development (R&D) expenses came in at $1.19 billion, up from $996 million in the year-ago quarter due to higher clinical trial and manufacturing ramp-up expenses related to remdesivir. Selling, general and administrative (SG&A) expenses increased to $1.164 billion from $1.09 million in the year-ago quarter.

2020 Guidance

Gilead revised its annual guidance. Product sales are projected around $23-$25 billion (previous guidance: $21.8 - $22.2 billion). Earnings per share are projected around $6.25-$7.65 (previous guidance: $6.05 -$6.45).

COVID-19 Update

In May 2020, the FDA issued an Emergency Use Authorization (“EUA”) for investigational antiviral, remdesivir, under the brand name Veklury for the treatment of hospitalized patients with severe COVID-19. It was also granted Conditional Marketing Authorization in Europe in July.

Gilead completed the delivery of the previously announced donation of its initial supply of 1.5 million doses of remdesivir at the end of June. As the company transitions beyond this donation, it set the pricing of Veklury at $390 per vial for governments of developed countries and $520 per vial for U.S. private insurance companies and others.

Gilead currently expects to manufacture more than two million remdesivir treatment courses by the end of 2020 and several million more treatment courses in 2021.

The company initiated two open-label phase III studies in February (SIMPLE studies) on experimental candidate, remdesivir, for COVID-19. The study demonstrated that the five-day treatment course resulted in significantly greater clinical improvement versus treatment with standard of care alone.

Gilead also initiated a phase I study to evaluate the safety, tolerability and pharmacokinetics of an investigational, inhaled solution of remdesivir in healthy volunteers.

It plans to evaluate remdesivir in combination with Eli Lilly’s JAK inhibitor, baricitinib, and Roche’s RHHBY IL-6 receptor antagonist, Actemra.

Other Updates

Gilead acquired Forty Seven for approximately $4.9 billion, adding magrolimab, which is currently in phase Ib/II studies for several hematological cancers, to its pipeline.

The FDA has granted accelerated approval to Tecartus, the first and only approved CAR T cell therapy for the treatment of adult patients with relapsed or refractory mantle cell lymphoma.

In July, Gilead and Galapagos GLPG obtained a positive opinion from European Medicines Agency’s (“EMA”) Committee for Medicinal Products for Human Use (“CHMP”) for Jyseleca (filgotinib 200 mg and 100 mg tablets) for the treatment of adults with moderate-to-severe rheumatoid arthritis.

Our Take

Gilead’s second-quarter earnings and sales missed expectations due to the pandemic.  Nevertheless, the strong performance of Biktarvy amid stiff competition from the likes of GlaxoSmithKline GSK was impressive.

Gilead Sciences, Inc. Price, Consensus and EPS Surprise

 

Gilead Sciences, Inc. Price, Consensus and EPS Surprise

Gilead Sciences, Inc. price-consensus-eps-surprise-chart | Gilead Sciences, Inc. Quote

Meanwhile, the company is seeing early signs of recovery from this impact and expects a full recovery by the second half.

Currently, there are no FDA-approved treatments for the severe illness caused by SARS-CoV-2. Given the alarming levels of spread and severity, the demand for Gilead’s remdesivir is expected to be strong.

Gilead currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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