Please ensure Javascript is enabled for purposes of website accessibility

Breaking Down Gilead Sciences' Rough Quarter

By Motley Fool Staff - May 6, 2016 at 8:23AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company is feeling the pressure from the market, as both top and bottom lines fail to impress.

In this segment from the Motley Fool Money radio show, Chris Hill and Jeff Fischer talk about why Gilead Sciences (GILD 0.89%) saw a drop in revenue and profits this quarter, which was particularly disappointing given the high expectations investors had for the company -- after all, it was a highflier not so long ago.

The pair discusses why Gilead is struggling despite the recent success of its hepatitis C drugs (which have proven to be popular with a big customer in the public sector), what the company is sacrificing for market share, and how the stock is valued in the wake of the results announcement.

A transcript follows the video.

This podcast was recorded on April 29, 2016. 

Chris Hill: Gilead Sciences increased its quarterly dividend, and that was pretty much the only positive news in its first-quarter report. Their revenue was light. Their profits were down. How much pressure is there on this company right now?

Jeff Fischer: A lot of pressure. Gilead is like the Apple of the biotech industry. It had such a big hit in its hepatitis C drugs just a couple years ago that drove billions of dollars in new revenue. And now that revenue has flattened out. And this quarter, it actually declined a bit, just like the iPhone. So investors are wondering, how do you grow from here? You've done so well. What's next? They had more hepatitis C patients this last quarter, and yet revenue from the drug went down, because there's more competition, and they're giving price concessions, discounts. 

They also had a positive note, really good thing, more government buying of the hepatitis C drug, Veteran Affairs treating veterans. So, it's good. Seven hundred thousand people, approximately, have been cured of hepatitis C in this country alone thanks to Gilead's drugs, and they maintain around 90% market share across most markets. But they are cutting prices to maintain that share, and that hit the bottom line. I think the stock's sell-off, which was big on Friday, was overdone. Shares look really cheap, seven to eight times earnings. Especially because management says they stand by their guidance for the full year that they gave last quarter. They didn't lower guidance, despite a soft quarter.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
$62.36 (0.89%) $0.55

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.