It's been a while since Gilead Sciences (NASDAQ:GILD) provided a pleasant surprise for investors with its quarterly earnings. The big biotech announced its third-quarter results after the market closed on Tuesday. Did Gilead turn the corner? Here's what you need to know about the company's results.
By the numbers
Gilead yet again reported lower revenue and earnings than the prior-year period. While revenue met investors' expectations, earnings fell short.
|Metric||Q3 2016||Q3 2015||YOY Decrease|
|Revenue||$7.5 billion||$8.3 billion||(9.6%)|
|GAAP earnings||$3.33 billion||$4.6 billion||(27.6%)|
|GAAP earnings per diluted share||$2.49||$3.06||(18.6%)|
|Non-GAAP earnings||$3.68 billion||$4.84 billion||(24%)|
|Non-GAAP earnings per diluted share||$2.75||$3.22||(14.6%)|
Adjusted non-GAAP figures looked a little better than the biotech's GAAP results mainly from carving out acquisition-related expenses. Gilead's per-share results also had more favorable year-over-year comparisons thanks to buying back stock, including $10 billion of share repurchases in the first nine months of 2016.
Behind the numbers
Harvoni's slide continued to be the big story for Gilead. Sales of the hepatitis C drug in the third quarter totaled $1.86 billion, a 44% drop from the prior year period. The only bright spot for Harvoni was increasing sales in Japan.
While Harvoni's predecessor, Sovaldi, enjoyed a small sales bump in the second quarter, that wasn't the case in the third quarter. Sales for Sovaldi fell nearly 44% year over year to $825 million.
New hepatitis C drug Epclusa helped offset some of the declines of Harvoni and Sovaldi -- but not nearly enough. Gilead reported third-quarter sales for Epclusa of $640 million.
The company's HIV franchise saw mixed results. Sales for Truvada were $858 million, nearly 5% lower than the third quarter of 2015. Atripla's sales totaled $650 million, a drop of over 20% compared with the prior-year period. However, Gilead reported $621 million in sales for Stribild, a nearly 22% jump from the same quarter of last year. Complera/Eplivera sales also increased by 14% to $411 million.
Gilead's best news on the HIV front stemmed from its newer drugs. Genvoya chalked up sales of $461 million in the third quarter. Odefsey kicked in another $105 million, with Descovy generating sales of $88 million.
Other drugs in Gilead's lineup saw solid year-over-year improvements. Sales for pulmonary arterial hypertension treatment Letairis grew nearly 19% to $215 million. Angina drug Ranex sales in the third quarter were $170 million, up almost 6%. Sales for cancer drug Zydelig increased 8% from the prior year period to $39 million.
Obviously, Gilead can't depend on its hepatitis C franchise to produce the staggering numbers it has in the past. Still, though, the biotech generated cash flow from operating activities of $4.3 billion -- primarily from its hepatitis C and HIV products.
While HIV and hepatitis C will continue to be important for Gilead, the biotech's future success could depend on other indications. Gilead's pipeline includes four candidates targeting treatment of nonalcoholic steatohepatitis (NASH). The company could become a leader in the lucrative NASH market.
Zydelig hasn't exactly lit the world on fire yet, but Gilead claims another couple of experimental cancer drugs in late-stage clinical studies that could be successful. Despite a setback in September with the termination of a phase 2/3 study of GS-5745 in treating moderately to severely active ulcerative colitis, Gilead's lineup of potential anti-inflammatory drug candidates also looks strong.
Probably the biggest question for Gilead Sciences in the days ahead is what the company will do with its enormous cash stockpile. The company reported $31.6 billion in cash, cash equivalents, and marketable securities as of Sept. 30. That's a nice jump from the $24.6 billion on hand at the end of the second quarter.
Gilead could continue to make smaller deals as it has been doing, but a major acquisition isn't out of the question. Investors should benefit from continued share buybacks and dividend increases while the biotech mulls over strategic acquisitions.