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Should You Buy, Sell or Hold Gilead Sciences (GILD) Before Q2 Earnings?
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Biotech giant Gilead Sciences, Inc. (GILD - Free Report) is scheduled to report second-quarter 2024 results on Aug 8, after market close.
The Zacks Consensus Estimate for sales and earnings is pegged at $6.64 billion and $1.61 per share, respectively.
Image Source: Zacks Investment Research
Earnings Surprise History
GILD’s earnings missed estimates in two of the trailing four quarters and beat the same in the other two, delivering an average surprise of 3.20%.
Image Source: Zacks Investment Research
What Our Model Predicts
Our proven model predicts 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. This is the case here, as you will see below.
Earnings ESP: Earnings ESP for GILD is +0.25%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Factors at Play
Gilead has a market-leading HIV franchise, led by flagship HIV therapies — Biktarvy and Descovy. Higher Biktarvy sales, boosted by higher demand, have likely fueled sales in the second quarter. Biktarvy continues to gain market share in the United States, outpacing all other branded regimens for HIV treatment. Descovy’s revenues, too, have likely increased as pre-exposure prophylaxis (PrEP) market continued to demonstrate robust growth.
The second-quarter top-line estimate for Biktarvy and Descovy is pegged at $3.2 billion and $506 million, respectively, and our model estimate for the same is pinned at $3.3 billion and $502 million.
The Liver Disease portfolio sales include chronic hepatitis C virus, chronic hepatitis B virus and chronic hepatitis delta virus. Higher demand for chronic hepatitis delta virus products and chronic hepatitis B virus has likely boosted sales of this franchise in the second quarter.
Veklury sales continue to be highly variable. Lower COVID-related hospitalizations might have resulted in lower sales.
Cell Therapy product sales have likely increased in the to-be-reported quarter. Yescarta sales are projected to have been driven by increased demand for relapsed or refractory (R/R) large B-cell lymphoma outside the United States.
Tecartus (brexucabtagene autoleucel) sales are being driven by increased demand in adult R/R B-cell precursor acute lymphoblastic leukemia and mantle cell lymphoma. Continued demand for Yescarta and Tecartus in both existing and new markets across Europe and other geographies, such as Japan, must have driven demand for both Yescarta and Tecartus.
The Zacks Consensus Estimate and our estimate for Cell Therapy product sales are pinned at $519 million and $531.3 million, respectively.
Increased sales of Trodelvy, indicating continued solid uptake in metastatic triple-negative breast cancer, have also likely boosted sales in the second quarter. The Zacks Consensus Estimate and our estimate for Trodelvy sales are pinned at $343 million and $377.7 million, respectively.
While R&D expense must have increased due to incremental expenses associated with the CymaBay acquisition, SG&A expenses have possibly declined.
Earlier in the year, Gilead acquired a clinical-stage biopharmaceutical company, CymaBay Therapeutics, Inc., for $4.3 billion. The acquisition added CymaBay’s investigational lead product candidate, seladelpar, to Gilead’s pipeline.
Seladelpar is an investigational, oral, selective peroxisome proliferator-activated receptor delta agonist, shown to regulate critical metabolic and liver disease pathways. A new drug application seeking approval of the candidate for the treatment of primary biliary cholangitis (PBC) was submitted to the FDA in December 2023. The FDA granted priority review to the same with a target action date of Aug 14, 2024.
Gilead also entered into a research collaboration, option and license agreement with Merus (MRUS - Free Report) to discover novel dual tumor-associated antigens targeting trispecific antibodies.
Price Performance and Valuation
Gilead’s shares have lost 5.5% year to date compared with the industry's decline of 0.5%. The stock has also grossly underperformed the sector and the S&P 500.
Image Source: Zacks Investment Research
Going by the price/sales ratio, GILD’s shares currently trade at 3.44x forward sales, higher than 1.98 for the industry but lower than its mean of 3.48.
Image Source: Zacks Investment Research
Investment thesis
Gilead’s efforts to constantly innovate its HIV portfolio should enable it to maintain growth amid competition from GSK plc (GSK - Free Report) . The company’s strategic deals and acquisitions to diversify its business are encouraging. Gilead expects HIV drug sales to grow 4% in 2024.
The upbeat top-line results from an interim analysis of its late-stage study evaluating the safety and efficacy of twice-yearly, subcutaneous lenacapavir for PrEP were a big positive. The potential approval of lenacapavir for PrEP should solidify Gilead’s HIV franchise, as lenacapavir needs to be taken twice yearly, unlike daily oral pills.
However, its recent pipeline setbacks are a matter of concern.
Conclusion
A current levels, we would not advise the investors to either buy or sell the stock. For investors already owning the stock, staying invested will be a prudent move as the company transitions its overall portfolio and waddles through expenses. In fact, the long-term estimates show an upward trend, giving a reason to be optimistic. Newer drugs could pave the way for growth for Gilead in the future.
A key reason to stay invested is the company’s attractive dividend yield. Gilead has been consistently increasing and paying out dividends. Its strong cash position (as of Mar 31, 2024, GILD had $4.7 billion of cash, cash equivalents and marketable debt securities) indicates that the current yield of 4% is likely to be sustainable.
Image: Bigstock
Should You Buy, Sell or Hold Gilead Sciences (GILD) Before Q2 Earnings?
Biotech giant Gilead Sciences, Inc. (GILD - Free Report) is scheduled to report second-quarter 2024 results on Aug 8, after market close.
The Zacks Consensus Estimate for sales and earnings is pegged at $6.64 billion and $1.61 per share, respectively.
Image Source: Zacks Investment Research
Earnings Surprise History
GILD’s earnings missed estimates in two of the trailing four quarters and beat the same in the other two, delivering an average surprise of 3.20%.
Image Source: Zacks Investment Research
What Our Model Predicts
Our proven model predicts 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. This is the case here, as you will see below.
Earnings ESP: Earnings ESP for GILD is +0.25%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Factors at Play
Gilead has a market-leading HIV franchise, led by flagship HIV therapies — Biktarvy and Descovy. Higher Biktarvy sales, boosted by higher demand, have likely fueled sales in the second quarter. Biktarvy continues to gain market share in the United States, outpacing all other branded regimens for HIV treatment. Descovy’s revenues, too, have likely increased as pre-exposure prophylaxis (PrEP) market continued to demonstrate robust growth.
The second-quarter top-line estimate for Biktarvy and Descovy is pegged at $3.2 billion and $506 million, respectively, and our model estimate for the same is pinned at $3.3 billion and $502 million.
The Liver Disease portfolio sales include chronic hepatitis C virus, chronic hepatitis B virus and chronic hepatitis delta virus. Higher demand for chronic hepatitis delta virus products and chronic hepatitis B virus has likely boosted sales of this franchise in the second quarter.
Veklury sales continue to be highly variable. Lower COVID-related hospitalizations might have resulted in lower sales.
Cell Therapy product sales have likely increased in the to-be-reported quarter. Yescarta sales are projected to have been driven by increased demand for relapsed or refractory (R/R) large B-cell lymphoma outside the United States.
Tecartus (brexucabtagene autoleucel) sales are being driven by increased demand in adult R/R B-cell precursor acute lymphoblastic leukemia and mantle cell lymphoma. Continued demand for Yescarta and Tecartus in both existing and new markets across Europe and other geographies, such as Japan, must have driven demand for both Yescarta and Tecartus.
The Zacks Consensus Estimate and our estimate for Cell Therapy product sales are pinned at $519 million and $531.3 million, respectively.
Increased sales of Trodelvy, indicating continued solid uptake in metastatic triple-negative breast cancer, have also likely boosted sales in the second quarter. The Zacks Consensus Estimate and our estimate for Trodelvy sales are pinned at $343 million and $377.7 million, respectively.
While R&D expense must have increased due to incremental expenses associated with the CymaBay acquisition, SG&A expenses have possibly declined.
Earlier in the year, Gilead acquired a clinical-stage biopharmaceutical company, CymaBay Therapeutics, Inc., for $4.3 billion. The acquisition added CymaBay’s investigational lead product candidate, seladelpar, to Gilead’s pipeline.
Seladelpar is an investigational, oral, selective peroxisome proliferator-activated receptor delta agonist, shown to regulate critical metabolic and liver disease pathways. A new drug application seeking approval of the candidate for the treatment of primary biliary cholangitis (PBC) was submitted to the FDA in December 2023. The FDA granted priority review to the same with a target action date of Aug 14, 2024.
Gilead also entered into a research collaboration, option and license agreement with Merus (MRUS - Free Report) to discover novel dual tumor-associated antigens targeting trispecific antibodies.
Price Performance and Valuation
Gilead’s shares have lost 5.5% year to date compared with the industry's decline of 0.5%. The stock has also grossly underperformed the sector and the S&P 500.
Image Source: Zacks Investment Research
Going by the price/sales ratio, GILD’s shares currently trade at 3.44x forward sales, higher than 1.98 for the industry but lower than its mean of 3.48.
Image Source: Zacks Investment Research
Investment thesis
Gilead’s efforts to constantly innovate its HIV portfolio should enable it to maintain growth amid competition from GSK plc (GSK - Free Report) . The company’s strategic deals and acquisitions to diversify its business are encouraging. Gilead expects HIV drug sales to grow 4% in 2024.
The upbeat top-line results from an interim analysis of its late-stage study evaluating the safety and efficacy of twice-yearly, subcutaneous lenacapavir for PrEP were a big positive. The potential approval of lenacapavir for PrEP should solidify Gilead’s HIV franchise, as lenacapavir needs to be taken twice yearly, unlike daily oral pills.
However, its recent pipeline setbacks are a matter of concern.
Conclusion
A current levels, we would not advise the investors to either buy or sell the stock. For investors already owning the stock, staying invested will be a prudent move as the company transitions its overall portfolio and waddles through expenses. In fact, the long-term estimates show an upward trend, giving a reason to be optimistic. Newer drugs could pave the way for growth for Gilead in the future.
A key reason to stay invested is the company’s attractive dividend yield. Gilead has been consistently increasing and paying out dividends. Its strong cash position (as of Mar 31, 2024, GILD had $4.7 billion of cash, cash equivalents and marketable debt securities) indicates that the current yield of 4% is likely to be sustainable.
Gilead currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.