Gilead Sciences Killed It

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We already knew that Gilead Sciences (Nasdaq: GILD) was a virus killer. Apparently it's also an analyst killer as well.

The company blew through analysts' expectations yesterday when it released its third-quarter results. Product sales were up 39%, although total revenue was up just 30%, as royalties from sales of Tamiflu by Roche saw another year-over-year drop. The bird flu never materialized into the pandemic it could have been. However, Gilead is still making plenty of money off its HIV drug franchise.

In fact, it's making even more money from this: The antiviral drugs are benefiting from a National Institutes of Health clinical trial earlier this year that pitted Gilead’s Truvada HIV combo drug against GlaxoSmithKline's (NYSE: GSK) Epzicom. Part of the trial had to be stopped early because patients taking Glaxo's drug were faring worse than patients on therapies including Truvada.

The news helps entrench Gilead as a leader in the first-line therapy and should help Gilead and Bristol-Myers Squibb (NYSE: BMY) keep their place in line with the first drugs to be used on newly diagnosed patients. Up-and-coming drugs like Merck's (NYSE: MRK) Isentress and Johnson & Johnson's (NYSE: JNJ) Intelence will likely have to prove that they're superior in head-to-head trials before gaining front-line status.

Not only did sales of Truvada increase some 34% to $549 million, but sales of Atripla, another anti-HIV drug, grew at a blistering 77% to $428 million. Together, these two drugs made up 73% of the company's product sales.

With a deepening moat around its ever-expanding castle, Gilead looks like a long-term winner. It's throwing off gobs of cash -- more than half a billion in operating cash flow last quarter -- and in this market, cash is king. The company thinks its stock is cheap -- it's accelerating a plan to buy back $750 million worth of stock. Maybe you should take that as a sign.