Double-Digit Growth in a Recession

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Revenue up 31%. Earnings per share excluding one-time items up 42%. No, this isn't a flashback to the tech boom. These are results from yesterday.

The strong double-digit growth shouldn't be much of a surprise, though: Gilead Sciences' (Nasdaq: GILD) HIV patients need their medication even if there's a recession going on. Leading the pack (up 42%) was Atripla, its triple-combination product that contains Bristol-Myers Squibb's (NYSE: BMY) Sustiva and Gilead's Viread and Emtriva. At the present pace, Atripla should catch its two-in-one little brother, Truvada, fairly soon.

HIV isn't the only virus benefiting Gilead. The influenza virus helped the bottom line through royalties on sales of Tamiflu by Roche. The swine flu helped add an additional $105 million in royalties compared with last year. Here's the best part: Gilead records royalties in the quarter after Roche records the sales, so the extra bump in royalties will keep coming in long after the last swine flu victim has recovered.

Gilead is expanding outside of the virus-killing business with two cardiovascular drugs on the market. Sales of Letairis increased 9% quarter over quarter, and Ranexa sales increased 18% over the second quarter. Annualize those out, and you get some nice-looking growth rates.

However, both drugs' sales are closer to rounding errors in the $1.8 billion revenue number than blockbusters in their own right. The big move into cardiovascular could come from darusentan, Gilead's blood pressure medication for patients who can't control it with other medications like AstraZeneca's (NYSE: AZN) Zestril, Merck's (NYSE: MRK) Cozaar, or Pfizer's (NYSE: PFE) Norvasc. Data from a second phase 3 trial is expected in the next few months.

Despite the strong performance, investors weren't all that impressed, sending the stock down 3% today. I'll concede that the growth isn't as high as it was in the past -- revenue grew 55% per year from 2002-2007 -- but Gilead isn't as richly valued today as it was back then either. If Gilead can keep the growth of current products steady and work other compounds, like its partnership with Johnson & Johnson (NYSE: JNJ), through the pipeline, this looks like a nice entry point for investors.