No big shocker here. People still need to take their antiviral medication even if the purse strings are tight. Gilead Sciences (NASDAQ:GILD) put together another great quarter.
Revenue was up 30% year over year as the company's antiviral drugs grew 35%, led by HIV drugs Truvada and Atripla. The biggest climber, Atripla, which combines Gilead's own Truvada with Bristol-Myers Squibb's (NYSE:BMY) Sustiva, jumped 79% year over year. The only downer was royalties from sales of Roche's Tamiflu, which dropped 65%, but that was to be expected, as worries about bird flu have subsided. Gilead has become much less dependent on Tamiflu -- royalties in 2008 made up just 3% of revenue compared with nearly 10% the year before -- which I'd argue is a good thing, given the unpredictability of a pandemic.
Earnings excluding a $0.04 tax benefit came in at $0.56 per share, over 36% higher than the year-ago quarter. The higher growth of the bottom line came from selling, general, & administrative costs and research & development expenses not growing as fast as revenue. The first one is definitely a positive -- more efficient use of sales reps and office staff is what economies of scale are all about. But R&D is not something the company should be skimping on. Gilead's drugs will eventually go off-patent, and now it has more revenue it'll need to replace.
Fortunately only one of those trends -- the good one -- looks like it will continue. Gilead is guiding for flat SG&A expenses as revenues increase 16% to 18% next year as it benefits from GlaxoSmithKline's (NYSE:GSK) Epzicom downgrade to an alternative usage after a trial showed that it wasn't as effective as Gilead's Truvada. R&D, on the other hand, will increase about 23%. That'll sting a little next year, but it's a good long-term investment.
At a P/E well over 20, Gilead doesn't look cheap, but that's all relative. Companies like Merck (NYSE:MRK) and Schering-Plough (NYSE:SGP) can be had for a lower multiple, but they're not likely to give you the kind of growth that Gilead can.
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. GlaxoSmithKline is an Income Investor pick. Take two Foolish disclosure policies and call me in the morning.
