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.
