It has been about a month since the last earnings report for Gilead Sciences (GILD). Shares have lost about 9.8% 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 Misses on Q2 Earnings & Sales, Ups ’20 Guidance
The company reported earnings of $1.11 per share in the quarter under review, which missed the Zacks Consensus Estimate of $1.46 and declined from $1.72 in the year-ago quarter.
Total revenues of $5.143 billion missed the Zacks Consensus Estimate of $5.3 billion and decreased from $5.685 billion in the year-ago quarter.
Quarter in Detail
Total product sales decreased 10% to $5.1 billion for the second quarter of 2020 due to lower sales volume of chronic hepatitis C virus (“HCV”) products as a result of the COVID-19 pandemic, which led to fewer healthcare provider visits and screenings.
HIV product sales decreased 1% to $4.0 billion for the second quarter of 2020 due to lower sales volume of Truvada (emtricitabine [FTC] and tenofovir disoproxil fumarate [TDF])-based products. Moreover, the reversal of the pull forward of revenues into the first quarter due to COVID-19 also had a negative impact on the revenues. Truvada sales plunged to $387 million from $718 million in the year-ago quarter. Nevertheless, Biktarvy maintained momentum with sales of $1.6 billion, up from $1.1 billion in the year-ago quarter.
Genvoya generated sales of $816 million, down from $980 million in the year-ago quarter. Descovy recorded sales of $417 million, up from $358 million in the year-earlier period, while Odefsey sales were $382 million, down from $387 million a year ago.
HCV product sales decreased 47% to $448 million due to lower sales volume, driven by lower patient starts in the United States and Europe.
CAR-T therapy, Yescarta (axicabtageneciloleucel), generated $156 million in sales, up from $120 million a year ago, driven by its continued expansion in Europe. Sales also grew from $140 million in the previous quarter.
Sales from Letairis and Ranexa declined to $80 million and $1 million due to generic entries in 2019.
Adjusted product gross margin was 84.3% compared with 87% in the year-ago period. Research & development (R&D) expenses came in at $1.19 billion, up from $996 million in the year-ago quarter due to higher clinical trial and manufacturing ramp-up expenses related to remdesivir. Selling, general and administrative (SG&A) expenses increased to $1.164 billion from $1.09 million in the year-ago quarter.
2020 Guidance
Gilead revised its annual guidance. Product sales are projected around $23-$25 billion (previous guidance: $21.8 – $22.2 billion). Earnings per share are projected around $6.25-$7.65 (previous guidance: $6.05 -$6.45).
COVID-19 Update
In May 2020, the FDA issued an Emergency Use Authorization (“EUA”) for investigational antiviral, remdesivir, under the brand name Veklury for the treatment of hospitalized patients with severe COVID-19. It was also granted Conditional Marketing Authorization in Europe in July.
Gilead completed the delivery of the previously announced donation of its initial supply of 1.5 million doses of remdesivir at the end of June. As the company transitions beyond this donation, it set the pricing of Veklury at $390 per vial for governments of developed countries and $520 per vial for U.S. private insurance companies and others.
Gilead currently expects to manufacture more than two million remdesivir treatment courses by the end of 2020 and several million more treatment courses in 2021.
The company initiated two open-label phase III studies in February (SIMPLE studies) on experimental candidate, remdesivir, for COVID-19. The study demonstrated that the five-day treatment course resulted in significantly greater clinical improvement versus treatment with standard of care alone.
Gilead also initiated a phase I study to evaluate the safety, tolerability and pharmacokinetics of an investigational, inhaled solution of remdesivir in healthy volunteers.
It plans to evaluate remdesivir in combination with Eli Lilly’s JAK inhibitor, baricitinib, and Roche’s IL-6 receptor antagonist, Actemra.
Other Updates
Gilead acquired Forty Seven for approximately $4.9 billion, adding magrolimab, which is currently in phase Ib/II studies for several hematological cancers, to its pipeline.
The FDA has granted accelerated approval to Tecartus, the first and only approved CAR T cell therapy for the treatment of adult patients with relapsed or refractory mantle cell lymphoma.
In July, Gilead and Galapagos obtained a positive opinion from European Medicines Agency’s (“EMA”) Committee for Medicinal Products for Human Use (“CHMP”) for Jyseleca (filgotinib 200 mg and 100 mg tablets) for the treatment of adults with moderate-to-severe rheumatoid arthritis.
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 15.49% due to these changes.
VGM Scores
At this time, Gilead has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 A. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. 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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