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Weaker-than-expected sales of blockbuster hepatitis C drug Harvoni led to disappointing results for Gilead Sciences (GILD -2.65%) in the first quarter of 2016. Investors were hoping for better results when the big biotech posted its second-quarter numbers after the market closed on Monday. Were they disappointed again? Here are the highlights.

By the numbers

Gilead reported total revenue of $7.78 billion in the second quarter. That figure reflected a 5.6% drop from the $8.24 billion in revenue from the prior-year period. It also was slightly down from Gilead's first-quarter revenue of $7.79 billion.

With that significant of a revenue drop, you might expect earnings comparisons to also suffer. You'd be right. Gilead announced second-quarter earnings of $3.5 billion. The biotech's earnings were 22% below the $4.5 billion posted in the first quarter of 2015. Gilead reported second-quarter non-GAAP earnings of $4.18 billion -- nearly 14% less than the prior-year period.

Thanks to share buybacks, though, Gilead's earnings-per-share comparisons didn't look quite as bad. The biotech posted second-quarter GAAP earnings per diluted share of $2.58, down from $2.92 in the prior-year period. Non-GAAP earnings per diluted share were $3.08, a 2% drop from the $3.15 non-GAAP earnings per diluted share recorded in the same quarter of 2015.

While Gilead's second-quarter results weren't great, the company's updated full-year guidance was probably even more concerning to investors. The biotech now expects 2016 net product sales between $29.5 billion and $30.5 billion. That's a cut from the $30 billion to $31 billion range previously provided.

There was one positive financial result for Gilead: its cash position. The company reported $24.6 billion of cash, cash equivalents, and marketable securities as of June 30, up from $21.3 billion at the end of the first quarter. 

Behind the numbers

What was behind Gilead's dismal second quarter? Further declining sales for Harvoni. Sales for the hepatitis C drug plunged nearly 29% year over year to $2.56 billion. U.S. sales in the second quarter were nearly half the levels from the prior-year period. Japanese sales of $448 million helped, but not nearly enough to offset the massive U.S. sales decline.

On the other hand, Harvoni's predecessor, Sovaldi, saw a small bump in sales. Second-quarter sales for Sovaldi totaled $1.36 billion, up over 5% from the second quarter of 2015. While European sales for the drug were sharply off, sales increases in the U.S. and the rest of the world more than made up the gap.

Gilead reported mixed results from its past HIV winners. Sales for Truvada were up nearly 11% year over year to $942 million. Second-quarter sales for Viread, which treats HIV and hepatitis B, totaled $287 million, an increase of almost 6% compared to the same quarter in 2015.  

However, sales for Atripla fell to $673 million, nearly 14% less than the result from the prior-year period. Stribild's sales also dropped to $429 million, a 4% year-over-year decline.

The bright spots for Gilead came from its newer drugs. Sales for HIV drug Genvoya, which received FDA approval in November 2015, were $302 million. Another new HIV drug, Descovy, which won FDA approval in April, brought in second-quarter sales of $61 million. Odefsey, approved by the FDA in March, generated sales of $58 million.

The biotech also recorded $64 million in sales for Epclusa, the first treatment for all genotypes of hepatitis C. What's notable about this figure is that it was achieved between June 28, when the FDA approved Epclusa, and the end of the second quarter on June 30. 

Looking ahead

What we don't know at this point is how much of Harvoni's woes stem from competition from Merck's (MRK -2.63%) Zepatier. Merck received FDA approval for Zepatier in January. The hepatitis C drug compares favorably with Harvoni in efficacy and safety. Even more importantly, Merck priced Zepatier well below the list price Gilead set for Harvoni.

Based on the relatively hefty sales results for Epclusa, though, it could be that Gilead's own drug is the bigger threat for Harvoni. The biotech priced the new hep-C drug less than either Harvoni or Sovaldi (but still more than Merck's Zepatier). Sometimes physicians hold off on prescribing an existing drug when they know a better (or cheaper) drug is on the way. I suspect this happened in the second quarter and hurt Harvoni's sales.

If that's the case, the good news for Gilead is that this slump should be only temporary. Ultimately, the rise of Epclusa could be really great for the big biotech if it keeps Merck from gaining market share with Zepatier.

Long-term investors will want to think about Gilead from a broader perspective rather than focus only on one quarter's results. The biotech has a promising pipeline, particularly with its nonalcoholic steatohepatitis program. Gilead has a solid dividend. And when a company still hauls in earnings of $3.5 billion and adds to its already large cash stockpile, "disappointing" is definitely a relative term.