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Gilead Sciences, Inc. Boosts Its Full-Year Outlook Thanks to Stronger-Than-Expected Hep C Sales

By Keith Speights - Jul 26, 2017 at 5:02PM

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The big biotech enjoyed solid growth from its HIV franchise in the second quarter and thinks its hepatitis C drugs will perform better than previously anticipated in the rest of 2017.

When Gilead Sciences, Inc. (GILD -1.27%) reported its first-quarter results earlier this year, everyone expected sales for the biotech's hepatitis C franchise to be way down. Those expectations were met in spades. The primary good news was that Gilead's HIV drug sales were up, although not nearly enough to offset the hep C decline.

Gilead provided an update on its second-quarter performance after the market closed on Wednesday. Again, expectations were for lower hep C sales. There were some hopes, though, that the rate of decline would at least slow, and that Gilead's HIV drugs would pick up momentum. Here are the highlights of what actually happened during the second quarter.

Two scientists working in a lab.

Image source: Getty Images.

Gilead Sciences results: The raw numbers

Metric 

Q2 2017 

Q2 2016 

Year-Over-Year Change

Sales

 $7.14 billion $7.78 billion 

(8.2%)

Net income from continuing operations

 $3.07 billion $3.5 billion 

(12.1%)

Adjusted EPS

 $2.56 $3.08 

(16.9%)

Data source: Gilead Sciences. 

What happened with Gilead Sciences this quarter?

As expected, Gilead's hepatitis C franchise again dragged down the company's overall financial results in the second quarter. Hep C revenue fell 27.5% year over year to $2.9 billion -- but the rate of decline slowed from the first quarter. Strong growth for Epclusa partially offset the continued plunge in sales for Harvoni and Sovaldi.

What investors should have expected in the biotech's second-quarter results were improving sales for Gilead's newer HIV drugs. That turned out to be a reasonable expectation, with climbing sales for Genvoya, Descovey, and Odefsey more than making up for lower sales of older HIV drugs Truvada, Atripla, and Stribild. Overall, Gilead's HIV franchise generated revenue of $3.6 billion in the second quarter, a 16.1% jump over the prior-year period.

Gilead also enjoyed solid growth outside of its antiviral product lineup. Revenue from the company's other products beyond hep C and HIV totaled $607 million in the second quarter, a 15.6% year-over-year increase.

Another thing investors probably anticipated was a nice boost to Gilead's cash stockpile. The big biotech didn't disappoint, reporting cash, cash equivalents, and marketable securities of nearly $36.6 billion, up from $34 billion at the end of the first quarter.

Gilead's major developments during the second quarter included a couple of significant pipeline milestones. On July 18, the Food and Drug Administration approved hepatitis C combo Vosevi. The European Committee for the Medicinal Products for Human Use (CHMP) also gave a positive opinion for the drug. In addition, Gilead submitted its promising bictegravir/emtricitabine/tenofovir alafenamide combo for treating HIV for U.S. regulatory approval. 

Looking forward

Perhaps the best news of all in Gilead's second-quarter results was that the company upped its outlook for full-year 2017. Gilead now expects net product sales between $24 billion and $25.5 billion, up from the $22.5 billion to $24.5 billion range previously projected.

There were two reasons behind this positive change in outlook. First, Gilead now thinks that its non-hepatitis C revenue will come in between $15 billion and $15.5 billion instead of the $15.5 billion to $16 billion range previously given. Second, and more important, the company expects hep C sales for 2017 will be between $8.5 billion and $9.5 billion. Previously, Gilead had anticipated hep C revenue of $7.5 billion to $9 billion.

This boost to guidance doesn't mean that Gilead has turned the corner with its hep C franchise, of course. However, it's certainly good news for a biotech that has been sorely in need of something positive.

Gilead goes into the second half of 2017 with a large cash position and tremendous cash flow. Its HIV franchise continues to be strong, and its pipeline looks pretty solid. The primary questions that remains are when Gilead will make an acquisition -- and which company (or companies) will be scooped up.  

 

Keith Speights owns shares of Gilead Sciences. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has the following options: short August 2017 $75 calls on Gilead Sciences. The Motley Fool has a disclosure policy.

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