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Gilead, a leader in the hepatitis C virus (“HCV”) space, has a decent track record, with the company’s earnings beating estimates in three of the last four while missing in one. In the last reported quarter, the company’s earnings beat expectations by 4.7%. Overall, the company recorded an average positive earnings surprise of 7.5%.
Gilead’s stock has rallied 10.5% over a year outperforming the industry's decline of 10.8%.
Why A Likely Positive Surprise?
Our proven model indicates that Gilead is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates which is what the case is here, as you will see below.
Zacks ESP: Earnings ESP for Gilead is +0.32%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: Gilead currently carries a Zacks Rank #2 which when combined with a positive ESP makes us reasonably confident of an earnings beat this quarter.
Conversely, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Factors at Play
Concurrent with the fourth-quarter earnings call, Gilead provided guidance for 2018. Gilead now expects net product sales in the range of $20-$21 billion.
Strong HIV performance and other antiviral product sales are being driven by continued uptake of tenofovir alafenamide (“TAF”) based products — Genvoya, Descovy and Odefsey. We expect the trend to continue in the first quarter as well. Genvoya has already become the most prescribed regimen for both treatment-naïve and switch patients since its launch. The TAF-based regimens now represent 62% of total Gilead HIV prescription volume. Truvada for use in the pre-exposure prophylaxis setting also put up a strong performance as the company saw a significant uptick in PrEP usage in 2017 with approximately 153,000 patients using Truvada by the end of 2017. Moreover, the franchise received a further boost with the FDA approval of once-daily single tablet regimen (“STR”), Biktarvy (bictegravir 50mg/emtricitabine 200mg/tenofovir alafenamide 25mg, BIC/FTC/TAF) for HIV-1 infection in February 2018. Hence, sales should get a further boost. The Zacks Consensus Estimate for sales of Genvoya is $1074 million. However, Gilead lost exclusivity for Viread in some countries outside the United States which might impact sales.
On the other hand, the HCV franchise continues to be under competitive and pricing pressure leading to a massive decline in Harvoni and Sovaldi sales. Harvoni and Sovaldi has been facing competition from AbbVie’s (ABBV - Free Report) Viekira Pak and Viekira XR among others. The franchise suffered a significant plunge in sales due to new competition and fewer patient starts. Both pricing and market share are expected to stabilize by mid-2018 while patient starts are expected to decline further. HCV revenues are projected to decline further and will constitute a smaller portion of the top-line going forward.
The Zacks Consensus Estimate for sales of lead HCV drug Sovaldi and Harvoni are $98 million and $466 million, respectively.
Adjusted R&D expenses and adjusted SG&A expenses are projected in the range of $3.4-$3.6 billion and $3.4-$3.6 billion, respectively. Adjusted product gross margin is expected in the range of 85-87%.
Meanwhile, the Kite acquisition was a step in the right direction with the FDA approval of its chimeric antigen receptor T-cell (CAR-T) therapy, Yescarta (axicabtagene ciloleucel), for the treatment of refractory aggressive non-Hodgkin lymphoma, which includes DLBCL, transformed follicular lymphoma and primary mediastinal B-cell lymphoma. However, management stated that Yescarta launch will be a controlled launch to ensure patient safety as CAR-T therapy is complicated and can sometimes be associated with severe side effects.
Gilead is also looking to build up a nonalcoholic steatohepatitis franchise. We expect the management to throw more light on the same during the first-quarter’s call. Investors are also likely to keep an eye on other pipeline updates.
Other Stocks to Consider
Here are some other health care stocks that you may want to consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter.
Celgene Corporation is scheduled to release first-quarter results on May 4. The company has an Earnings ESP of +0.63% and a Zacks Rank #3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Is a Beat in the Cards for Gilead (GILD) in Q1 Earnings?
Gilead Sciences Inc. (GILD - Free Report) is scheduled to report first-quarter results on May 1, after the market closes.
Gilead Sciences, Inc. Price, Consensus and EPS Surprise
Gilead Sciences, Inc. Price, Consensus and EPS Surprise | Gilead Sciences, Inc. Quote
Gilead, a leader in the hepatitis C virus (“HCV”) space, has a decent track record, with the company’s earnings beating estimates in three of the last four while missing in one. In the last reported quarter, the company’s earnings beat expectations by 4.7%. Overall, the company recorded an average positive earnings surprise of 7.5%.
Gilead’s stock has rallied 10.5% over a year outperforming the industry's decline of 10.8%.
Why A Likely Positive Surprise?
Our proven model indicates that Gilead is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates which is what the case is here, as you will see below.
Zacks ESP: Earnings ESP for Gilead is +0.32%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: Gilead currently carries a Zacks Rank #2 which when combined with a positive ESP makes us reasonably confident of an earnings beat this quarter.
Conversely, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Factors at Play
Concurrent with the fourth-quarter earnings call, Gilead provided guidance for 2018. Gilead now expects net product sales in the range of $20-$21 billion.
Strong HIV performance and other antiviral product sales are being driven by continued uptake of tenofovir alafenamide (“TAF”) based products — Genvoya, Descovy and Odefsey. We expect the trend to continue in the first quarter as well. Genvoya has already become the most prescribed regimen for both treatment-naïve and switch patients since its launch. The TAF-based regimens now represent 62% of total Gilead HIV prescription volume. Truvada for use in the pre-exposure prophylaxis setting also put up a strong performance as the company saw a significant uptick in PrEP usage in 2017 with approximately 153,000 patients using Truvada by the end of 2017. Moreover, the franchise received a further boost with the FDA approval of once-daily single tablet regimen (“STR”), Biktarvy (bictegravir 50mg/emtricitabine 200mg/tenofovir alafenamide 25mg, BIC/FTC/TAF) for HIV-1 infection in February 2018. Hence, sales should get a further boost. The Zacks Consensus Estimate for sales of Genvoya is $1074 million. However, Gilead lost exclusivity for Viread in some countries outside the United States which might impact sales.
On the other hand, the HCV franchise continues to be under competitive and pricing pressure leading to a massive decline in Harvoni and Sovaldi sales. Harvoni and Sovaldi has been facing competition from AbbVie’s (ABBV - Free Report) Viekira Pak and Viekira XR among others. The franchise suffered a significant plunge in sales due to new competition and fewer patient starts. Both pricing and market share are expected to stabilize by mid-2018 while patient starts are expected to decline further. HCV revenues are projected to decline further and will constitute a smaller portion of the top-line going forward.
The Zacks Consensus Estimate for sales of lead HCV drug Sovaldi and Harvoni are $98 million and $466 million, respectively.
Adjusted R&D expenses and adjusted SG&A expenses are projected in the range of $3.4-$3.6 billion and $3.4-$3.6 billion, respectively. Adjusted product gross margin is expected in the range of 85-87%.
Meanwhile, the Kite acquisition was a step in the right direction with the FDA approval of its chimeric antigen receptor T-cell (CAR-T) therapy, Yescarta (axicabtagene ciloleucel), for the treatment of refractory aggressive non-Hodgkin lymphoma, which includes DLBCL, transformed follicular lymphoma and primary mediastinal B-cell lymphoma. However, management stated that Yescarta launch will be a controlled launch to ensure patient safety as CAR-T therapy is complicated and can sometimes be associated with severe side effects.
Gilead is also looking to build up a nonalcoholic steatohepatitis franchise. We expect the management to throw more light on the same during the first-quarter’s call. Investors are also likely to keep an eye on other pipeline updates.
Other Stocks to Consider
Here are some other health care stocks that you may want to consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter.
GW Pharmaceuticals plc is expected to report earnings on May 8. The company has an Earnings ESP of +8.11% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Celgene Corporation is scheduled to release first-quarter results on May 4. The company has an Earnings ESP of +0.63% and a Zacks Rank #3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>