Is Gilead (GILD) Poised for a Beat This Earnings Season?

Gilead Sciences Inc. GILD is scheduled to report second-quarter 2017 results on Jul 26, after the market closes. Last quarter, the company beat expectations by 0.92%.

Gilead Sciences, Inc. Price and EPS Surprise

 

Gilead Sciences, Inc. Price and EPS Surprise | Gilead Sciences, Inc. Quote

Gilead’s track record is pretty mixed, with the company beating estimates in three of the last four and missing in the other one. Overall, the company recorded an average positive earnings surprise of 3.52%.

Shares of Gilead have moved up 1.5% in the year so far, underperforming the Zacks classified Medical-Biomedical and Genetics industry’s gain of 10.5%.

Let's see how things are shaping up for this biotech major for this announcement.

Earnings Whispers

Our proven model shows that Gilead is likely to beat on earnings estimates this quarter. This is because it has the right combination of two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.32%. This is because the Most Accurate estimate is $2.18 while the Zacks Consensus Estimate is pegged lower at $2.11. 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 #3. The combination of Zacks Rank #3 and a positive ESP makes us confident of an earnings beat.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

Concurrent with the first-quarter earnings call, Gilead reiterated its guidance for annual guidance for 2017.  Gilead expects net product sales in the range of $22.5–$24.5 billion. Non-HCV product sales are projected between $15 billion and $15.5 billion.  HCV product sales are projected between $7.5 billion and $9.0 billion.

Strong performance by HIV and other antiviral product sales driven by continued uptake of its tenofovir alafenamide (TAF) based products – Genvoya, Descovy and Odefsey continue to boost sales. We expect the trend to continue in the second quarter as well. Genvoya has already become the most prescribed regimen for both treatment-naïve and switch patients since its launch.

By the end of first-quarter 2017, the TAF-based regimens made up 42% of Gilead's HIV prescription volume in the treatment market. Strong uptake for Truvada for use in the pre-exposure prophylaxis setting is also expected to boost sales.  However, Gilead will lose exclusivity for Viread in 2017 in some countries outside the U.S. which might impact sales.

However, the HCV franchise continues to be under competitive and pricing pressure leading to a massive decline in Harvoni and Sovaldi sales in 2016. Harvoni and Sovaldi has been facing competition from AbbVie’s ABBV Viekira Pak and Viekira XR among others. Higher discounts and payer mix continue to impact sales adversely. Total HCV treatment starts in the U.S. were an estimated 231,000 in 2016, approximately 25,000 less than 2015. The company expects a further decline in patients starts in 2017.

On a positive note, the HCV portfolio received a major boost when Epclusa gained approval in 2016 to become the first and only all-oral, pan-genotypic, STR consisting of Sovaldi and velpatasvir (an NS5A inhibitor), for the treatment of adults with genotype 1–6 chronic HCV infection. Initial uptake of Epclusa has been encouraging while formulary reviews are on track. The recently approved HBV drug Vemlidy is also expected to start contributing to the top line. The FDA recently approved Vosevi (Sovaldi, velpatasvir 100 mg/voxilaprevir 100 mg) tablets as a single-tablet regimen (STR) for the re-treatment of chronic hepatitis C virus (HCV) infection in adults with genotype 1, 2, 3, 4, 5 or 6, previously treated with an NS5A inhibitor-containing regimen, or with genotype 1a or 3 previously treated with a Sovaldi-containing regimen without an NS5A inhibitor.

During the second-quarter call, investors are likely to keep an eye on Gilead’s performance while pipeline updates will also be keenly awaited. Focus would also be on the performance of Epclusa and TAF-based regimens.

Other Stocks Poised to Beat Estimates

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.

Vertex Pharmaceuticals Incorporated VRTX has an Earnings ESP of +66.7% and a Zacks Rank #1. The company is scheduled to release results on Jul 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alexion Pharmaceuticals, Inc. ALXN has an Earnings ESP of +6.48% and a Zacks Rank #3. The company is scheduled to release results on Jul 27.

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