Just how bad will it be? 

That was the question investors were asking in the days leading up to Gilead Sciences' (GILD 8.50%) announcement of its first-quarter 2017 results. Gilead provided an answer when it reported those results after the market closed on Tuesday. But questions still remain. 

Question mark on top of money

Image source: Getty Images.

Gilead Sciences results: The raw numbers


Q1 2017 

Q1 2016 

Year-Over-Year Change


 $6.51 billion  $7.79 billion


Net income from continuing operations

 $2.70 billion  $3.57 billion


Adjusted EPS

 $2.23  $3.03


Data source: Gilead Sciences. 

What happened with Gilead Sciences this quarter?

As expected, Gilead's hepatitis C virus (HCV) sales continued to drop. Combined HCV sales in the first quarter totaled $2.58 billion, down a whopping 40% from the prior-year period. Even with Epclusa's sales soaring to $892 million, the huge declines for Harvoni and Sovalid were simply too much for the newer HCV drug to offset.

A cursory glance at the biotech's big HIV drugs from the past few years might have also been discouraging. Sales fell in the first quarter for Truvada, Atripla, Stribild, Viread, and Complera/Eviplera compared with the prior-year period. However, newer HIV drugs Genvoya, Descovey, and Odefsey more than made up for those declines. Overall, sales for Gilead's HIV franchise increased 12.6% year over year.

Gilead's other products weren't nearly as important to the company's overall performance. Sales of pulmonary arterial hypertension drug Letairis jumped 20% over the prior-year period to $211 million. However, other drugs with less revenue experienced only single-digit-percentage increases. The only exception was blood cancer drug Zydelig, which continued to disappoint, with sales falling nearly 29% year over year to $35 million.

If you just looked at Gilead's GAAP results, you;d see the company's expenses were lower in the first quarter than in the prior-year period. However, a key reason for the decrease stemmed from higher research-and-development costs in 2016 related with Gilead's license and collaboration agreement with Galapagos NV (GLPG -0.41%). On a non-GAAP basis, Gilead's first-quarter spending increased from the same period in 2016, primarily because of expenses associated with the purchase of an FDA priority review voucher and higher branded prescription-drug fee expenses. 

Looking forward

Gilead reiterated its full-year 2017 guidance provided in February. The company continues to expect net product sales of $22.5 billion to $24.5 billion.

Despite the continued steep drop-off in HCV sales, there are some glimmers of hope. The decline in U.S. patient starts from the fourth quarter of 2016 to the first quarter of 2017 was relatively small. Patient starts in Europe held steady sequentially. 

Major rivals aren't taking too much market share from Gilead. AbbVie (ABBV 0.39%) reported first-quarter sales totaling $263 million for its HCV drugs Viekiera, reflecting a 35.5% year-over-year decline. Gilead's Sovaldi, which is now its lowest-selling HCV drug, made higher revenue than Viekira despite a huge decline from the prior-year period. 

Merck (MRK 1.33%) didn't have the same fate as AbbVie, though. The drugmaker reported first-quarter sales of $378 million for HCV drug Zepatier, a big jump from the $50 million in sales from the prior-year period. However, Gilead has much bigger HCV woes than the competition from Merck or AbbVie.

Gilead expects an FDA decision on approval for its sofosbuvir/velpatasvir/voxilaprevir combination treatment for HCV by Aug. 8. This final HCV product from the biotech could add some incremental revenue in the indication.

The biotech also has some promising late-stage pipeline candidates. A bictegravir/F/TAF combo could be Gilead's next big winner in HIV. Gilead expects to submit the combo treatment for regulatory approval in the U.S. and in Europe in the third quarter of this year.

Selonsertib (formerly GS-4997) is being evaluated in a phase 3 study targeting treatment of non-alcoholic steatohepatitis. Filgotinib, which Gilead licensed from partner Galapagos, is another late-stage candidate with tremendous potential in treating several autoimmune diseases. The problem is that late-stage candidates other than the bictegravir combo are probably a few years away from potential approval.

Perhaps the most encouraging news for Gilead's future is that its cash position continues to improve. At the end of the first quarter, the company reported cash, cash equivalents, and marketable securities of more than $34 billion -- up from $32.4 billion at the end of 2016. Gilead has plenty of money to spend on acquisitions that could improve its growth prospects. That prospect appears to be the most important thing for investors to look for in the days ahead.