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Will Coronavirus Woes Impact Gilead's (GILD) Q2 Earnings?

Biotech major Gilead Sciences Inc. GILD is slated to report second-quarter 2020 results on Jul 30, after market close.

Gilead has a disappointing track record, with earnings beating estimates in two of the last four quarters and missing in the other two, the average negative surprise being 3.07%. In the last reported quarter, the company beat expectations by 6.33%.

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

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

Factors at Play

Gilead did not provide any quarterly guidance. Strong performance of the HIV franchise led to better-than-expected sales in the first quarter, a trend that most likely continued in the second quarter. Higher sales volume as a result of the continued uptake of Biktarvy (bictegravir 50 mg/emtricitabine 200 mg/tenofovir alafenamide 25 mg) led to growth in the first quarter and the trend most likely continued in the second quarter. Biktarvy remained the number one prescribed HIV regimen in the United States in the first quarter. In addition, encouraging uptake of Descovy for the pre-exposure prophylaxis (PrEP) setting is likely to have benefited the top line.  However, stiff competition might have limited market share gains. The Zacks Consensus Estimate for sales of Biktarvy and Descovy is projected at $1.7 billion and $488 million, respectively.

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

CAR-T therapy, Yescarta (axicabtageneciloleucel), generated $140 million in sales during the first quarter of 2020 and second-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 $131 million.

However, concurrent with the first-quarter earnings call, Gilead anticipated negative impacts of COVID-19 on its business in the short term as fewer patients are accessing treatments for conditions like HIV and HCV. However, the magnitude of the anticipated impact is uncertain.

Updates on Remdesivir

Apart from the regular top and bottom-line numbers, we expect investors to focus on the company’s pipeline updates, particularly the experimental antiviral, remdesivir, for COVID-19.

Gilead is conducting two randomized, open-label, multicenter, phase III studies to evaluate the safety and efficacy of two dosing durations — 5 days and 10 days — of remdesivir in adults diagnosed with COVID-19. A comparative analysis of the phase III SIMPLE-Severe study and a real-world retrospective cohort of patients with severe COVID-19 showed that remdesivir was associated with an improvement in clinical recovery and a 62% reduction in the risk of mortality compared with standard of care. Gilead has also initiated a global, open-label phase II/III study to evaluate the safety, tolerability and pharmacokinetics of remdesivir in pediatric patients from birth to less than 18 years of age. The company is also collaborating on a study for pregnant women. The FDA also granted remdesivir an Emergency Use Authorization for the treatment of hospitalized patients with severe COVID-19, given the severity of the pandemic. It was granted regulatory approval in Japan under an exceptional approval pathway. The European Commission has granted conditional marketing authorization to remdesivir as a treatment for SARS-CoV-2 infection, under the brand name Veklury. Gilead has also initiated an early-stage study to evaluate remdesivir for use in inhaled formulation outside of hospitals. The drug is currently administered to hospitalized patients intravenously.

Share Price Performance

Gilead’s stock has gained 16.2% in the year so far compared with the industry's growth of 9.8%. In fact, remdesivir is pioneering the race for a possible treatment of this deadly virus and hence the company has been on the upward trajectory.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Gilead this time around. 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. But that is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($1.31) and the Zacks Consensus Estimate ($1.53), is -14.44%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Gilead currently has a Zacks Rank #3.

Stocks to Consider

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

Bristol-Myers Squibb BMY has an Earnings ESP of +0.23% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zoetis ZTS has an Earnings ESP of +6.60% and a Zacks Rank #2.

Pfizer PFE has an Earnings ESP of +1.04% and a Zacks Rank #3.

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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.

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