Another quarter, another disappointment.
Gilead Sciences (NASDAQ:GILD) announced its 2018 fourth-quarter results after the market closed on Monday. The big biotech beat Wall Street's expectations for revenue but missed badly on hitting the consensus earnings estimate.
Although Gilead still awaits new CEO Daniel O'Day to join the company, several current executives discussed the Q4 results and what's next for Gilead in the company's quarterly conference call. Here are seven key things you need to know from Gilead's Q4 update.
1. Why the big earnings miss in Q4?
The average analysts' earnings estimate for Q4 was $1.71 per share. Gilead's actual adjusted earnings per share (EPS) was only $1.44. CFO Robin Washington said the earnings miss stemmed primarily from a $410 million increase in non-GAAP cost of goods sold, which translated to a negative impact of $0.31 per share on adjusted EPS. This higher expense resulted mainly from excess Harvoni inventory as patients shifted to newer hepatitis C virus (HCV) drug Epclusa.
2. Will Gilead really return to growth in 2019 as predicted?
Gilead interim CEO Gregg Alton predicted at the J.P. Morgan Healthcare Conference in early January that the biotech would return to growth in 2019. However, Gilead's 2019 revenue guidance range of $21.3 billion to $21.8 billion reflected a small decline at the midpoint from 2018.
Robin Washington said Gilead is "very focused on returning to growth in 2019 and really believes[s] that's achievable." She added that the company's full-year guidance includes downside risk that could affect Gilead's business, including a potential $300 million impact from foreign exchange. In other words, it sounds like Gilead is trying to underpromise and overdeliver.
3. What's in store for the HIV and HCV franchises this year?
Gilead expects a banner year for its HIV franchise in 2019, with sales increasing between $1.6 billion and $1.8 billion. Continued momentum for Biktarvy and growing revenue for the biotech's other Descovy-based drugs is expected to fuel this overall HIV sales growth.
However, it will probably be the same old story for Gilead's HCV franchise. The company anticipates HCV revenue will fall between $800 million and $1 billion in 2019 due to lower patient starts and stiff competition.
4. Can sales for Yescarta nearly double in 2019?
Laura Hammill, Gilead's head of worldwide commercial operations, said the company expects sales for Yescarta will nearly double in 2019. That might seem overly optimistic considering that the cell therapy's sales increased by only $6 million from Q3 to Q4.
Hammill said, though, that Gilead is "seeing greater depth and breadth of treatment" at its certified treatment centers in the U.S. She stated that the company expects to expand in European markets throughout 2019. Hammill also noted that Gilead's positive data presented at the American Society of Hematology (ASH) meeting in late 2018 has generated enthusiasm about Yescarta among oncologists.
5. When will Gilead file for approval for filgotinib?
Gilead could have a blockbuster immunology drug on its hands with filgotinib. But even though the biotech expects to report results from two other phase 3 clinical studies for the drug in the first quarter of 2019, don't count on a quick filing for approval.
Chief Scientific Officer John McHutchison said Gilead won't be able to file for approval of filgotinib in the U.S. until it gets data from the Manta safety study of men with ulcerative colitis. McHutchison didn't say when that data would be available. However, the estimated primary completion date for the Manta study shown on the National Institutes of Health's clinical trials website is January 2021.
6. When will Gilead file for approval of selonsertib?
It's a better story for experimental non-alcoholic steatohepatitis (NASH) drug selonsertib. Gilead plans to report results from two late-stage studies in the first half of 2019. McHutchison said if the data from those studies are positive, Gilead should submit selonsertib for regulatory approval in the second half of this year.
7. What will new CEO Daniel O'Day do right out of the gate?
Daniel O'Day will become Gilead's new CEO on March 1, 2019, after serving as CEO of Roche. Gilead's Interim CEO, Gregg Alton, doesn't think O'Day will move quickly to make acquisitions.
Alton expects that O'Day will "take his time to get to know the company, spend more time with the management team, get to know our strategy." However, Alton added that O'Day will "put his own market on where he wants to take the company" over time -- likely taking less than a year to do so.