Gilead Sciences, Inc. Earnings: Will Sovaldi Send Shares Soaring?

Gilead has had huge stock gains over the past year, but earnings could come in flat from last year's levels. What's up with the big biotech company?

Feb 4, 2014 at 8:30AM

Gilead Sciences (NASDAQ:GILD) will release its quarterly report on Tuesday, and investors are still riding high as the biotech stock kept climbing in January -- after doubling in 2013. But even as the company celebrates success in the hepatitis C space that might finally break Gilead's streak of only marginal earnings growth, competitors AbbVie (NYSE:ABBV), Merck (NYSE:MRK), and Johnson & Johnson (NYSE:JNJ) are still aiming to eat into the company's earnings with competing products.

Gilead Sciences has had a huge track record of success, becoming one of the first biotech companies to achieve consistent success with its products. Lately, though, Gilead investors have had to wait for promising treatment prospects to make their way through the pipeline. Now that Gilead has products like its Sovaldi oral hepatitis-C treatment starting to take off, investors want to see the pent-up growth they've been anticipating for a long time. 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 report.

Gild
Source: Gilead Sciences

Stats on Gilead Sciences

Analyst EPS Estimate

$0.50

Change From Year-Ago EPS

0%

Revenue Estimate

$2.85 billion

Change From Year-Ago Revenue

10.2%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance

Can Gilead earnings begin to climb this quarter?
Analysts are finally starting to ratchet up their views on Gilead earnings in the long run. They've raised their fourth quarter estimates by a penny per share and boosted their full-year 2014 projections by a much more substantial 7.5%. That has helped the stock rise another 17% since late October.

Gilead's third-quarter results showed its continuing ability to keep raising revenue, with a 15% jump in sales coming from both established HIV treatments like Atripla and Truvada as well as newer HIV drugs like Stribild and Complera. Yet even though earnings grew from the previous year, Gilead didn't make as much money as investors had hoped.

Yet shareholders are much more excited about Gilead's future prospects. In December, the company got FDA approval for its Sovaldi hepatitis-C treatment, assuming the role as the first interferon-free treatment for certain genotypes of the disease. Even though Johnson & Johnson beat Sovaldi to the punch with its Olysio hep-C therapy, Olysio addresses a far-narrower subset of patients than Sovaldi does.

Sovaldi is such a huge opportunity for Gilead that many of the company's rivals are making legal allegations about whether Gilead infringed on intellectual property to create it. Idenix Pharmaceuticals (NASDAQ:IDIX) has seen its shares soar after Sovaldi's approval, with the company alleging that Gilead infringed on Idenix's patent rights in producing the treatment. Just last week, Gilead won a decision from the U.S. Patent and Trademark Office denying Idenix priority of invention, but the case will likely continue for years. Similarly, Merck has argued Sovaldi infringes on some of its patents as well, requesting royalties equal to 10% of Sovaldi's eventual sales.

But the real question is what impact AbbVie's competing all-oral hepatitis treatment cocktail could have on Gilead. Gilead hopes to apply for FDA approval of a treatment regimen including Sovaldi this quarter, potentially beating AbbVie's second quarter expected date. But with Sovaldi currently carrying a high price tag, an eventual price war could prevent Gilead from seeing the earnings boost that investors are counting on from the treatment.

In the Gilead earnings report, watch to see how the company responds to calls that Sovaldi is too expensive. With so much attention on health care costs lately, Gilead has to navigate carefully in order to avoid getting painted with negative publicity that could hurt its future earnings prospects.

Get smart about biotech stocks
The best way to play the biotech space is to find companies that shun the status quo and instead discover revolutionary, groundbreaking technologies. In the Motley Fool's brand-new FREE report "2 Game-Changing Biotechs Revolutionizing the Way We Treat Cancer," find out about a new technology that big pharma is endorsing through partnerships, and the two companies that are set to profit from this emerging drug class. Click here to get your copy today.

Click here to add Gilead Sciences to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Gilead Sciences and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers