It has been about a month since the last earnings report for Gilead Sciences (GILD). Shares have lost about 7% 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 the most recent earnings report in order to get a better handle on the important drivers.
Gilead Q4 Earnings Miss on Legal Settlement Charges
Gilead missed on earnings in the fourth quarter due to legal settlement charges. Sales from its antiviral COVID-19 treatment, Veklury also declined.
The company reported earnings of 69 cents per share in the quarter, which missed the Zacks Consensus Estimate of $1.53 and declined from $2.19 in the year-ago quarter. The year-over year decline was primarily due to the impact of $1.25 billion charge related to a legal settlement and a charge of $625 million related to the Arcus collaboration opt-in.
Total revenues of $7.2 billion surpassed the Zacks Consensus Estimate of $6.6 billion but decreased 2% from the year-ago quarter due to reduced demand for Veklury (remdesivir 100 mg for injection) for the treatment of COVID-19.
Quarter in Detail
Total product sales decreased 2% to $7.2 billion in the quarter under review. However, excluding Veklury, product sales increased 8% year over year to $5.8 billion due to higher demand for flagship HIV therapy Biktarvy (bictegravir 50 mg/FTC 200 mg/tenofovir alafenamide 25 mg (TAF) and favorable pricing dynamics in HIV as well as contributions from breast cancer drug Trodelvy (sacituzumab govitecan-hziy) and Cell Therapy.
HIV product sales increased 7% to $4.5 billion as higher Biktarvy sales and favorable pricing offset the decline in sales due to the loss of exclusivity of Truvada and Atripla in the United States. Biktarvy sales increased 22% year over year in the quarter, reflecting higher demand and favorable pricing dynamics. Truvada and Atripla sales decreased 58% and 29% year over year, respectively, due to the loss of exclusivity in the United States in late 2020.
HCV product sales decreased 7% to $393 million due to fewer patient starts.
Hepatitis B virus (HBV) and hepatitis delta virus (HDV) product sales were up 9% to $265 million. Vemlidy sales grew 17%, driven primarily by uptake in all regions. Hepcludex (bulevirtide) contributed $12 million to sales as launch activities continued across Europe.
Cell Therapy product sales increased 47% to $239 million. Yescarta sales increased to $182 million, driven by continued demand in relapsed or refractory large B-cell lymphoma (LBCL) and strong uptake in relapsed or refractory indolent follicular lymphoma in the United States. Tecartus sales totaled $57 million, driven by increased adoption in mantle cell lymphoma in the United States and Europe and launch in adult patients with relapsed or refractory B-cell precursor acute lymphoblastic leukemia.
Breast cancer drug, Trodelvy, generated $118 million of sales fueled by increased use of the second-line treatment of metastatic triple-negative breast cancer (TNBC) in the United States and Europe as well as second-line metastatic urothelial cancer (UC) in the United States.
Veklury sales decreased 30% to $1.4 billion due to lower demand.
Adjusted product gross margin was 63.3% compared with 80.9% in the year-ago period. Research & development expenses were $2 billion, up from $1.5 billion, as higher R&D expenses primarily reflect a charge related to the Arcus collaboration opt-in and increased Trodelvy and magrolimab clinical activities.
2021 Results
Revenues came in at $27.3 billion, up 11% from 2020 due to increased demand for Veklury. Earnings per share increased to $7.28 for 2021 from $7.09 in 2020.
2022 Guidance
Product sales are projected to be $23.8–$24.3 billion. Total product sales, excluding Veklury, are expected to be $21.8–$22.3 billion. Total Veklury sales are estimated at around $2 billion, reflecting the recent surge in COVID-19 hospitalizations. Earnings per share are expected in the range of $6.20-$6.70. The Zacks Consensus Estimate for sales and earnings per share is pegged at $24.2 billion and $6.89, respectively.
Other Updates
The company recently announced that dosing in the phase II study evaluating an investigational once-weekly oral combination treatment regimen of lenacapavir plus islatravir for the treatment of HIV was paused following clinical hold by FDA due to recent safety findings associated with islatravir.
Gilead also announced a collaboration with Merck to evaluate Trodelvy in combination with Keytruda in the first-line setting in patients with metastatic TNBC and in the first quarter of 2022 in patients with non-small cell lung cancer.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -11.23% due to these changes.
VGM Scores
At this time, Gilead has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Gilead has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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