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Why Is Gilead (GILD) Down 6.2% Since Last Earnings Report?
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It has been about a month since the last earnings report for Gilead Sciences (GILD - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Gilead due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Gilead Q2 Earnings & Sales Beat
Gilead’s second-quarter earnings beat estimates, the year-over-year decline was disappointing as the magnitude of decline in hepatitis C virus (HCV) sales continues to deepen. Moreover, the results were overshadowed by the news of the company’s president and chief executive officer (CEO), John F. Milligan’s departure.
The company’s second-quarter earnings of $1.91 per share beat the Zacks Consensus Estimate of $1.55. However, earnings were below the year-ago quarter figure of $2.56 per share. Total revenues of $5.7 billion beat the Zacks Consensus Estimate of $5.2 billion but declined 20.9% year over year.
HCV Drowns, HIV Floats
Product sales came in at $5.5 billion, down 21.4% year over year, due to accelerated decline in legacy hepatitis C virus (HCV) franchise.
HCV product sales plunged 65.5% due to lower sales of Harvoni, Epclusa and Sovaldi across all major markets, as a result of increased competition. Sales of Harvoni plunged 76% year over year to $331 million in the quarter. Epclusa garnered sales of $500 million in the quarter, down 57.3% from the year-ago quarter.
HIV product sales increased 12.9% year over year to $3.7 billion, primarily due to the continued uptake of products containing emtricitabine (FTC) and tenofovir alafenamide (TAF). Genvoya generated sales of $1.2 billion, up from $857 million in the year-ago quarter. Descovy recorded sales of $403 million, up from $286 million, while Odefsey registered sales of $385 million, up from $258 million in the year-ago quarter. 70% of Gilead's total HIV treatment prescription volume was comprised of Descovy-based regimens. We note that Gilead received a major boost when the FDA approved the company’s once-daily single tablet regimen (“STR”), Biktarvy (bictegravir 50mg/emtricitabine 200mg/tenofovir alafenamide 25mg, BIC/FTC/TAF) for HIV-1 infection. The recent approval of Biktarvy in Europe will further strengthen the company’s HIV franchise. Bikatrvy’s sales came in at $185 million. In March, Biktarvy was added to the U.S. DHHS guidelines for the use of antiretroviral agents in adults and adolescents living with HIV as one of the recommended initial regimens. Biktarvy also became the number one regimen for switch patients during the quarter. Gilead currently expects that Biktarvy will become the number one single tablet regimen for treatment-naïve patients and will overtake Genvoya, as the most successful launch in HIV history. Truvada, for use in the pre-exposure prophylaxis setting, continued to maintain momentum with an estimated 180,000 patients using the drug, by the end of the second quarter. The FDA expanded Truvada’s label to include at-risk adolescents as well, in May 2018. However, HIV sales were down slightly year-over-year in Europe, due to generic competition in several markets.
HIV treatments like Stribild and Complera/Eviplera sales declined 36.2% and 21.6%, respectively. Atripla sales tanked 26.5% to $349 million, while Truvada sales fell 5.8% to $765 million.
CAR-T therapy Yescarta (axicabtagene ciloleucel), which was launched in the United States in October 2017, generated $68 million in sales, up from $40 million in the previous quarter.
Other product sales, which include chronic hepatitis B (HBV) drugs, cardiovascular, oncology and other categories (Vemlidy, Viread, Letairis, Ranexa, Zydelig and AmBisome), were $807 million for the second quarter of 2018 compared to $932 million in the year-ago quarter.
Adjusted product gross margin was 84.2% compared to 87.3% in the year-ago period. Research & development (R&D) expenses increased 13.4% to $921 million. Selling, general and administrative (SG&A) expenses increased 1.6% to $840 million.
2018 Guidance
Gilead continues to expect net product sales in the range of $20-$21 billion. 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%.
Dividend and Share Repurchase
Gilead declared a cash dividend of 57 cents per share of common stock for third-quarter 2018. The dividend is payable on Sep 27 to stockholders of record at the close of business on Sep 14. During the quarter, the company paid cash dividends of $740 million and repurchased shares for $450 million.
CEO To Step Down
Concurrently, Gilead announced that its CEO, John F. Milligan, will step down after serving the company for 28 years. Milligan will continue in his current position through the end of the year, while the Board of Directors finds a successor.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.7% due to these changes.
VGM Scores
At this time, Gilead has a poor Growth Score of F, however its Momentum is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks style scores indicate that the company's stock is suitable for value and momentum investors.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise Gilead has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Gilead (GILD) Down 6.2% Since Last Earnings Report?
It has been about a month since the last earnings report for Gilead Sciences (GILD - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Gilead due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Gilead Q2 Earnings & Sales Beat
Gilead’s second-quarter earnings beat estimates, the year-over-year decline was disappointing as the magnitude of decline in hepatitis C virus (HCV) sales continues to deepen. Moreover, the results were overshadowed by the news of the company’s president and chief executive officer (CEO), John F. Milligan’s departure.
The company’s second-quarter earnings of $1.91 per share beat the Zacks Consensus Estimate of $1.55. However, earnings were below the year-ago quarter figure of $2.56 per share. Total revenues of $5.7 billion beat the Zacks Consensus Estimate of $5.2 billion but declined 20.9% year over year.
HCV Drowns, HIV Floats
Product sales came in at $5.5 billion, down 21.4% year over year, due to accelerated decline in legacy hepatitis C virus (HCV) franchise.
HCV product sales plunged 65.5% due to lower sales of Harvoni, Epclusa and Sovaldi across all major markets, as a result of increased competition. Sales of Harvoni plunged 76% year over year to $331 million in the quarter. Epclusa garnered sales of $500 million in the quarter, down 57.3% from the year-ago quarter.
HIV product sales increased 12.9% year over year to $3.7 billion, primarily due to the continued uptake of products containing emtricitabine (FTC) and tenofovir alafenamide (TAF). Genvoya generated sales of $1.2 billion, up from $857 million in the year-ago quarter. Descovy recorded sales of $403 million, up from $286 million, while Odefsey registered sales of $385 million, up from $258 million in the year-ago quarter. 70% of Gilead's total HIV treatment prescription volume was comprised of Descovy-based regimens. We note that Gilead received a major boost when the FDA approved the company’s once-daily single tablet regimen (“STR”), Biktarvy (bictegravir 50mg/emtricitabine 200mg/tenofovir alafenamide 25mg, BIC/FTC/TAF) for HIV-1 infection. The recent approval of Biktarvy in Europe will further strengthen the company’s HIV franchise. Bikatrvy’s sales came in at $185 million. In March, Biktarvy was added to the U.S. DHHS guidelines for the use of antiretroviral agents in adults and adolescents living with HIV as one of the recommended initial regimens. Biktarvy also became the number one regimen for switch patients during the quarter. Gilead currently expects that Biktarvy will become the number one single tablet regimen for treatment-naïve patients and will overtake Genvoya, as the most successful launch in HIV history. Truvada, for use in the pre-exposure prophylaxis setting, continued to maintain momentum with an estimated 180,000 patients using the drug, by the end of the second quarter. The FDA expanded Truvada’s label to include at-risk adolescents as well, in May 2018. However, HIV sales were down slightly year-over-year in Europe, due to generic competition in several markets.
HIV treatments like Stribild and Complera/Eviplera sales declined 36.2% and 21.6%, respectively. Atripla sales tanked 26.5% to $349 million, while Truvada sales fell 5.8% to $765 million.
CAR-T therapy Yescarta (axicabtagene ciloleucel), which was launched in the United States in October 2017, generated $68 million in sales, up from $40 million in the previous quarter.
Other product sales, which include chronic hepatitis B (HBV) drugs, cardiovascular, oncology and other categories (Vemlidy, Viread, Letairis, Ranexa, Zydelig and AmBisome), were $807 million for the second quarter of 2018 compared to $932 million in the year-ago quarter.
Adjusted product gross margin was 84.2% compared to 87.3% in the year-ago period. Research & development (R&D) expenses increased 13.4% to $921 million. Selling, general and administrative (SG&A) expenses increased 1.6% to $840 million.
2018 Guidance
Gilead continues to expect net product sales in the range of $20-$21 billion. 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%.
Dividend and Share Repurchase
Gilead declared a cash dividend of 57 cents per share of common stock for third-quarter 2018. The dividend is payable on Sep 27 to stockholders of record at the close of business on Sep 14. During the quarter, the company paid cash dividends of $740 million and repurchased shares for $450 million.
CEO To Step Down
Concurrently, Gilead announced that its CEO, John F. Milligan, will step down after serving the company for 28 years. Milligan will continue in his current position through the end of the year, while the Board of Directors finds a successor.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.7% due to these changes.
VGM Scores
At this time, Gilead has a poor Growth Score of F, however its Momentum is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks style scores indicate that the company's stock is suitable for value and momentum investors.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise Gilead has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.