Don't Worry for a Second About Gilead's Earnings Miss

Gilead Sciences (NASDAQ: GILD  ) shares have steadily risen more than 90% over the past year. The biotech announced first-quarter results after the market closed on Thursday, though, that weren't all that impressive. Will this be a problem for Gilead? I doubt it.

By the numbers
First quarter non-GAAP earnings came in at $801.9 million, or $0.48 per diluted share. That's up from $704.4 million, or $0.45 per diluted share, during the first quarter of last year. However, the average analysts' estimate called for earnings of $0.50 per share.

Gilead reported GAAP earnings for the first quarter of $722.2 million, or $0.43 per diluted share. This represents a large gain from the $442.0 million, or $0.28 per diluted share, reported in the same period for 2012.

Revenue for the quarter totaled $2.53 billion, an 11% increase year over year. However, that figure missed the $2.58 billion in revenue expected by analysts. $2.39 billion of that revenue stemmed from product sales. This amounts to an 8% bump from the first quarter of 2012.

The company listed $2.63 billion of cash, cash equivalents, and marketable securities on hand at the end of the first quarter. This reflects an increase from $2.58 billion recorded as of the end of 2012.

Behind the numbers
Newer HIV drugs Complera/Eviplera and Stribild were the stars of the first quarter. Complera/Eviplera sales increased by 184% year over year to $148.2 million. Meanwhile, Stribild racked up over $92 million in sales. That's more than double the $40 million in sales from fourth quarter for the drug, which was launched in the U.S. last August.

Viread also looked good. Sales for the drug totaled $210 million in the first quarter, up 10% from the same period in 2012.

Other HIV drugs lagged behind, though. Sales for Truvada fell by 8% year over year to $700 million. Atripla garnered sales of $877 million in the quarter, down 1% from first quarter of last year. These drugs were the culprits behind the earnings and revenue misses.

Gilead's cardiovascular drugs, while accounting for a relative small portion of total sales, also performed well. Sales for pulmonary hypertension drug Letairis jumped 35% year-over-year to $118 million. Angina drug Ranexa brought in $96 million during the quarter, up 16% from the same period last year.

Looking ahead
The biotech received bad news a few days ago. The U.S. Food and Drug Administration didn't approve HIV drugs elvitegravir and cobicistat, which were already approved as part of the Stribild quad pill.

I don't see this being a serious issue moving forward. The FDA's concerns related to quality testing procedures and should be relatively easily resolved.

Any worries that Teva Pharmaceuticals (NYSE: TEVA  ) might be able to challenge Gilead in the near future were allayed in February, so that's not a pressing concern for now. The two companies settled litigation that allows Teva to begin marketing a generic rival to Gilead's HIV drug on Dec. 15, 2017.

While Gilead seems poised to continue dominating the HIV market, the buzz these days focuses more on the hepatitis C arena. Gilead announced great results today from a mid-stage study of its all-oral combo of sofosbuvir plus ledipasvir both with and without ribavirin. 

This latest news confirms the view that Gilead has the pole position in the hep C race. AbbVie (NYSE: ABBV  ) claimed a victory last fall with a study showing that its four-drug regimen achieved a 99% cure rate after 12 weeks. Gilead's results included one arm of the study where patients were free of hep C after taking its drug combo after only eight weeks (and it did so with only three drugs at most, compared to AbbVie's four).

The strong performance from the sofosbuvir/ledipasvir combo also puts pressure on Vertex and Bristol-Myers Squibb. Vertex expects to announce results from its all-oral regimen featuring VX-135 later this year. Bristol plans to move into late-stage studies of its three-drug combo that doesn't rely on ribavirin this year as well.

For now, Gilead looks to be ahead of AbbVie, Bristol-Myers, and Vertex. Don't worry about that first-quarter earnings miss. I think Gilead's year-long run isn't over. This stock should keep on climbing.

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