A Game-Changer for Gilead Sciences?

Investors in Gilead Sciences (NASDAQ: GILD  ) had something to shout about last week as the company beat Wall Street estimates when it reported its fourth-quarter results.

While the results showed that earnings per share were the same as in the fourth quarter of 2012 at $0.47, they beat Wall Street estimates. Furthermore, revenue also beat Wall Street estimates of $2.85 billion, rising by 20% to hit $3.12 billion.

The EPS figure is slightly misleading, as quarterly profit increased by 4% to $791 million but, on a per-share basis, it stayed the same simply because of an increase in the number of shares in issue. So both the top line and bottom line grew when compared with the fourth quarter of 2012, giving investors something to cheer about.

A key reason behind the growth in sales and profits for Gilead was sales of its hepatitis C drug, Sovaldi, which amounted to $140 million following approval of the drug in December. This is highly encouraging news for investors in Gilead, and with the drug's having been approved in Canada (also in December) as well as the European Union (in January), Sovaldi could prove to be a blockbuster drug for Gilead in 2014.

Sovaldi appears to be an improvement on current treatments for hepatitis C, with incumbent Incivek (sold by Johnson & Johnson (NYSE: JNJ  ) and Vertex Pharmaceuticals (NASDAQ: VRTX  ) ) taking longer to treat the illness and having a lower success rate. Interestingly, Vertex recently sold the overseas rights of Incivek to Johnson & Johnson for $152 million as domestic sales of the drug fell by 91% in the fourth quarter of 2013 -- highlighting the strength of Sovaldi sales in December.

While Sovaldi cured around 90% of patients with hepatitis C after 12 weeks of treatment in clinical trials, Incivek cures around 75% of patients over the course of a year. Furthermore, patients treated with Sovaldi don't need to take interferon, an injectable drug that can cause diarrhea, so long as Sovaldi is taken alongside ribavirin. This, coupled with the relatively high success rate of the drug and its relatively short treatment time, means that it could become a blockbuster for Gilead in 2014.

Of course, Johnson & Johnson had a new drug for the treatment of hepatitis C approved in late 2013, too. However, it seems as though Sovaldi could win the race, as Gilead seeks out additional combination drugs to be used alongside Sovaldi.

Meanwhile, Gilead also saw strength in sales of its antiviral and cardiovascular products, with the former increasing sales by 22% and the latter by 25% when compared with the fourth quarter of 2013. Of particular note were Complera and Eviplera, where sales more than doubled to $260 million, while Stribild saw sales increase from $40 million to more than $200 million.

Guidance for 2014 seems encouraging, although Gilead has excluded sales of Sovaldi from its forecasts. However, with an impressive level of uptake since approval on Dec. 6 and the anticipation that it could be a blockbuster drug, Sovaldi could be a game-changer for Gilead in 2014.

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