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The Key to Growth For Gilead Earnings

Gilead Sciences (NASDAQ: GILD  ) will release its quarterly report tomorrow, and investors have been hugely enthusiastic about the company's prospects, pushing the stock to all-time highs recently. Yet even as its share price soars, expectations are for Gilead earnings not to grow nearly as much as its stock's success would suggest.

One key reason for that apparent disconnect is that Gilead has a number of highly promising treatments in its pipeline that could ramp up earnings in the long run. Many of them still have to make it through the approval process, but if they're successful, they could become the company's cash cows for years to come. Let's take an early look at what's been happening with Gilead Sciences over the past quarter and what we're likely to see in its quarterly report.

Stats on Gilead Sciences

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$2.66 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Gilead earnings reverse their miss last quarter?
Analysts have had mixed views on Gilead earnings in recent months, cutting their views for the current year by $0.04 per share but raising their 2014 estimates by more than twice that amount. The stock has taken the longer-term view, rising 11% since mid-April.

One reason to be concerned about Gilead's report this quarter is that the company gave investors a rare disappointment back in May. The company missed earnings and sales estimates despite posting an almost 14% rise in adjusted profits on 11% higher revenue. Weaker sales of its HIV drugs Truvada and Atripla held back better performance from some of its newer drugs. Although with its Stribild alternative HIV treatment having all in-house drugs as its components, the company benefits from seeing sales move away from Atripla, for which Gilead needs to share revenue with co-collaborators Johnson & Johnson (NYSE: JNJ  ) and Bristol-Myers Squibb.

But Gilead has had great success with a new proposed combination hepatitis C treatment, as phase 2 trials for sofosbuvir and ledipasvir produced a 95% cure rate for the disease. Sofosbuvir got approved for priority review by the FDA last month, with one big benefit from the drug being that patients can take it in oral form. That's one reason why investors aren't more worried about the fact that Johnson & Johnson's rival hep-C drug simeprevir was first to enter the FDA priority review process in May, as simeprevir requires pegylated interferon and therefore must be injected, with the attendant inconvenience and potential for side effects. Moreover, J&J's drug only treats patients with one particular genotype of the hep-C virus, while Gilead's potentially treats all hep-C types.

In the HIV treatment field, Gilead might face long-term storm clouds. J&J and GlaxoSmithKline (NYSE: GSK  ) have looked at a new combination HIV therapy that would require injections only monthly or perhaps even quarterly, avoiding some of the possible liver-related side effects that have been associated with Gilead's oral Stribild treatment. Yet the treatment is early in the development process and could have years to go even if successful.

In the Gilead earnings report, watch to see whether the company makes any comments on the possible bidding war for Onyx Pharmaceuticals. With Gilead rival Amgen having made a bid that Onyx rejected, Onyx is looking for higher bidders elsewhere, and a buyout would give Gilead greater exposure to the cancer-treatment space. Yet with a dearth of cash, the buy would tax Gilead's finances and remove flexibility to consider other strategic options. Given so many other promising prospects, Gilead doesn't need to buy Onyx in order to support earnings growth in the future.

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