Gilead (GILD) Beats on Q3 Earnings & Sales, Lowers '20 View

Zacks Equity Research
·5-min read

Shares of Gilead Sciences, Inc. GILD are trading down in pre-market hours after it lowered its annual guidance while reporting the third-quarter 2020 results, wherein it beat both earnings and sales estimates. 

The guidance was lowered primarily due to the impacts of the COVID-19 pandemic and lower demand for antiviral drug, Veklury.

The company reported earnings of $2.11 per share in the quarter under review, which beat the Zacks Consensus Estimate of $1.83 and grew from $1.64 in the year-ago quarter.

Gilead Sciences, Inc. Price, Consensus and EPS Surprise

 

Gilead Sciences, Inc. Price, Consensus and EPS Surprise
Gilead Sciences, Inc. Price, Consensus and EPS Surprise

Gilead Sciences, Inc. price-consensus-eps-surprise-chart | Gilead Sciences, Inc. Quote

Total revenues of $6.6 billion beat the Zacks Consensus Estimate of $6.2 billion and increased 17% from the year-ago quarter mainly owing to incremental sales from Veklury.

Quarter in Detail

Total product sales increased 18% to $6.5 billion for the third quarter of 2020. Excluding Veklury (remdesivir), product sales increased 2% year over year to $5.6 billion, driven by core HIV products.

HIV product sales increased 8% to $4.5 billion, driven by higher volumes as channel inventory continues to normalize in the United States and stronger patient demand. Biktarvy sales grew to $1.9 billion from $1.2 billion in the year-ago quarter as market share continues to grow in the United States. Growth in Descovy also boosted the top line as sales jumped to $508 million from $363 million. Genvoya generated sales of $846 million, down from $978 million in the year-ago quarter.

Truvada sales plunged to $509 million from $721 million in the year-ago quarter. Gilead expects a significant decline in Truvada sales as the first generic version of Truvada became available in the United States on Oct 2, 2020.

HCV product sales decreased 31% to $464 million driven by lower patient starts in the United States and Europe, attributable to a decrease in healthcare provider visits and lower screenings due to the COVID-19 pandemic.

Cell Therapy product sales, which include Yescarta (axicabtagene ciloleucel) and Tecartus (brexucabtagene autoleucel) revenues, increased 25% to $147 million, driven by the continued uptake and expansion of Yescarta in Europe. Tecartus was approved by the FDA during the third quarter of 2020.

Veklury generated revenues of $873 million for the third quarter of 2020.

Other product sales decreased 11% to $462 million.

Adjusted product gross margin was 86.5% compared with 86.1% in the year-ago period. Research & development (R&D) expenses came in at $1.15 billion, up from $1.02 billion 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 $1.09 billion from $1.04 million in the year-ago quarter.

2020 Guidance Lowered

Gilead lowered its annual guidance. Product sales are now projected to be $23-$23.5 billion (previous guidance: $23-$25 billion). Earnings per share are projected to be $6.25-$6.60 (previous guidance: $6.25-$7.65).

Immunomedics’ Acquisition

Gilead recently acquired Immunomedics for approximately $21 billion. The acquisition added Trodelvy (sacituzumab govitecan-hziy), a first-in-class Trop-2-directed antibody-drug conjugate to its portfolio. Trodelvy was granted accelerated approval by the FDA in April for the treatment of adult patients with metastatic triple-negative breast cancer (“mTNBC”) who have received at least two prior therapies for metastatic disease.

COVID-19 Update

The FDA granted full approval to Veklury for the treatment of patients with COVID-19 and the European Commission (EC) granted conditional Marketing Authorization to the same. It was earlier granted an Emergency Use Authorization (“EUA”) by the FDA.

In July, a phase I study was initiated to evaluate the safety, tolerability and pharmacokinetics of an investigational, inhaled solution of remdesivir in healthy volunteers. Remdesivir is also being evaluated in combination with Eli Lilly’s LLY JAK inhibitor, baricitinib.

Other Updates

In July, Gilead and Galapagos GLPG announced that the EC granted marketing authorization to Jyseleca for the treatment of adults with moderate-to-severe active RA who have responded inadequately to, or are intolerant to, one or more disease-modifying anti-rheumatic drugs.

Our Take

While Gilead’s third-quarter earnings and sales beat expectations on incremental Veklury sales, the lowered forecast due to lower-than-expected demand for Veklury was disappointing.

Currently, there are no FDA-approved treatments for the severe illness caused by SARS-CoV-2 and Veklury’s demand will be a key factor for the company as the pandemic gains steam again.

Nevertheless, the strong performance of Biktarvy amid stiff competition from the likes of GlaxoSmithKline GSK was impressive.

Gilead’s stock has lost 9.6% in the year so far compared with the industry's decline of 6.9%.

 

Meanwhile, the company expects its core business to continue to gradually recover in the fourth quarter of 2020. The company’s efforts to strengthen its oncology franchise are encouraging as well.

Gilead currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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