Will Coronavirus Woes Affect Gilead's (GILD) Q3 Earnings?

Biotech major Gilead Sciences Inc. GILD is slated to report third-quarter 2020 results on Oct 28, after market close.

Gilead has a disappointing track record, with earnings missing estimates in three of the last four quarters and beating in the remaining one, the average negative surprise being 10.21%. In the last reported quarter, the company missed expectations by 23.97%.

Let’s see how things have shaped up for this announcement.

Why a Likely Positive Surprise

Our proven model predicts an earnings beat for Gilead this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP for Gilead is +3.08% as the Zacks Consensus Estimate is pegged at $1.89, while the Most Accurate Estimate is pegged at $1.83.

Zacks Rank: It currently carries a Zacks Rank #3.

Factors at Play

Gilead did not provide any quarterly guidance. The company 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.

HIV product sales were down in the second quarter due to lower sales volume of Truvada (emtricitabine [FTC] and tenofovir disoproxil fumarate [TDF])-based products. However, concurrent with the second-quarter results, the company stated that it is witnessing early signs of recovery from this impact. Consequently, sales must have stabilized in the third quarter. The negative impacts of the COVID-19 pandemic were most likely offset by continued momentum in Biktarvy sales and the uptake of Descovy for the pre-exposure prophylaxis (PrEP) setting.  The Zacks Consensus Estimate for sales of Biktarvy and Descovy is projected at $1.7 billion and $514 million, respectively.

HCV sales are likely to have declined in the third quarter, a trend continuing for many quarters.

CAR-T therapy, Yescarta (axicabtageneciloleucel), generated $156 million in sales during the second quarter of 2020 and third-quarter sales might have experienced a sequential increase, driven by a higher number of therapies provided to patients and its continued expansion in Europe.  The Zacks Consensus Estimate for Yescarta sales is projected at $166 million.

Updates on Remdesivir

Apart from the regular top and bottom-line numbers, we expect investors to focus on the company’s pipeline updates.  Gilead recently announced that the FDA has approved the antiviral drug, Veklury (remdesivir), for the treatment of patients with COVID-19 requiring hospitalization. The drug was previously authorized by the FDA for emergency use to treat COVID-19. Veklury is now the first and only approved COVID-19 treatment in the United States. Hence, an update on the guidance is expected from Gilead.

Other Pipeline & Regulatory Updates

In September, the European Commission (EC) granted marketing authorization to Jyseleca (filgotinib 200 mg and 100 mg tablets), a once-daily, oral, JAK1 inhibitor, for the treatment of adults with moderate to severe active rheumatoid arthritis (RA) who have responded inadequately to, or are intolerant to, one or more disease-modifying anti-rheumatic drugs (DMARDs). An update on the launch and uptake of the same is expected when the company releases its third-quarter results.

In September, Gilead announced that it will acquire Immunomedics IMMU for $88.00 per share in cash or approximately $21 billion. The acquisition is anticipated to close during the fourth quarter of 2020. The acquisition will add Trodelvy (sacituzumab govitecan-hziy), a first-in-class antibody-drug conjugate (ADC), to Gilead’s portfolio. Trodelvy was granted accelerated approval by the FDA in April for the treatment of adult patients with metastatic triple-negative breast cancer (mTNBC) who have received at least two prior therapies for metastatic disease. An update on the same is expected during the call.

Share Price Performance

Gilead’s stock has lost 6.6% in the year so far compared with the industry's decline of 2.9%.

Stocks to Consider

Here are some other drug/biotech stocks you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.

Vertex Pharmaceuticals VRTX has an Earnings ESP of +0.88% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Horizon HZNP has an Earnings ESP of +5.58% and a Zacks Rank #2.

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