Gilead (GILD) Down 7.9% Since Earnings Report: Can It Rebound?

It has been more than a month since the last earnings report for Gilead Sciences, Inc. GILD. Shares have lost about 7.9% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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’s HCV Sales Weak, Earnings Beat

Gilead reported third quarter 2017 results wherein both earnings and revenues surpassed expectations.

The company’s third-quarter earnings (including the impact of stock-based compensation expenses) of $2.27 per share beat the Zacks Consensus Estimate of $2.09. However, earnings were below the year-ago quarter figure of $2.75.

Moreover, total revenues of $6.5 billion topped the Zacks Consensus Estimate of $6.3 billion. However, revenues declined 13.2% year over year.

HIV Impresses Yet Again, Harvoni & Sovaldi Plunges

Product sales came in at $6.4 billion, down 13.5% year over year. The decline was due to lower hepatitis C virus (HCV) sales, partially offset by higher sales across HIV and other therapeutic areas.

Antiviral product sales, which include Gilead's HIV and liver disease portfolio, came in at $5.8 billion in the reported quarter, down 14.7%.

HCV product sales, which include Harvoni, Sovaldi, Epclusa and Vosevi, were $2.2 billion, down from $3.3 billion reported in the year-ago quarter. The downside was mainly attributed to lower sales of Harvoni and Sovaldi across all major markets, partially offset by sales of Epclusa (launched in 2016) and sales of Vosevi (approved in the United States and Europe in July 2017).

Sales of Harvoni declined 47.7% year over year to $973 million in the reported quarter. Further, Sovaldi sales recorded a steep year-over-year decline of 73.4% to $219 million.

Epclusa garnered sales of $882 million in the reported quarter, up from the year-ago figure of $640 million. We note that Epclusa was launched in the U.S. and Europe in June and Jul 2016, respectively.

Meanwhile, HIV and HBV product sales came in at $3.6 billion, up 16.1% year over year. The increase was primarily driven by continuous strong uptake of tenofoviral afenamide (TAF)-based products such as Genvoya, which generated sales of $988 million, up from $461 million in the year-ago quarter, Descovy, which recorded sales of $316 million, up from $88 million, and Odefsey, which registered sales of $296 million, up from $105 million. HIV treatments like Stribild and Complera/Eviplera sales declined 63.1% and 42.3% respectively. Viread sales were down at $274 million, down 9.6%.

Atripla sales tanked 32.4% to $439 million, while Truvada sales fell 5.5% to $811 million.

Other products like Letairis, Ranexa, AmBisome and Zydelig recorded sales of $213 million (down 0.9%), $164 million (down 3.5%), $92 million (up 1.1%) and $40 million (up 2.5%), respectively.

Research & development (R&D) expenses declined 24% to $745 million. On the other hand, selling, general and administrative (SG&A) expenses increased 3.3% to $806 million. Adjusted product gross margin was 87.2% compared to 87.6% in the year-ago period.

2017 Guidance Updated

Gilead now expects net product sales in the range of $24.5-$25.5 billion, up from $24.0-$25.5 billion provided earlier. Non-HCV product sales are projected between $16 billion and $16.5 billion (earlier projection: $15.5 billion and $16 billion). HCV product sales are projected between $8.5 billion and $9.0 billion (earlier projection: $8.5 billion and $9.5 billion). Adjusted R&D expenses and adjusted SG&A expenses are now projected in the range of $3.3-$3.4 billion and $3.3-$3.4 billion, respectively. Adjusted product gross margin is expected in the range of 86-87%. Earnings per share are now projected around $1.02-$1.17 (earlier projection: 86-93 cents).

Kite Acquisition

The company recently acquired Kite Pharma. Last week, the company received FDA approval for Yescarta, a CAR-T therapy for the treatment of adult patients with relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy.

Dividend and Share Repurchase

Concurrently, Gilead declared a cash dividend of 52 cents per share of common stock for fourth-quarter 2017. The dividend is payable on Dec 28 to stockholders of record at the close of business on Dec 15. During the quarter, the company paid cash dividends of $682 million and repurchased shares for $153 million.

How Have Estimates Been Moving Since Then?

Following the release and in the last month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

Gilead Sciences, Inc. Price and Consensus

 

Gilead Sciences, Inc. Price and Consensus | Gilead Sciences, Inc. Quote

VGM Scores

At this time, Gilead's stock has a poor Growth Score of F, however its Momentum is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than momentum investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research