On Thursday, my favorite large-cap drugmaker, Gilead Sciences (NASDAQ:GILD), released its third-quarter financial results. True to form, the numbers were impressive, and given the potential in its drug pipeline, its prospects look even brighter now than they did the last time around.

The results were in line with what we've seen from Gilead in the first two quarters of 2007. Revenue was up 41% in Q3 versus a year ago, and non-GAAP earnings per share rose 11 cents year over year to $0.45. Sales of Gilead's key HIV franchise product gained an 45%.

On a related note, HIV combination drug Atripla got the go-ahead in the European Union last week. Following an approximately 60-day waiting period, the drug will be given final approval, and Gilead and its partners on the compound, Bristol-Myers Squibb (NYSE:BMY) and Merck (NYSE:MRK), can begin marketing and reimbursement discussions throughout the E.U.

Competition in the HIV treatment space is heating up, though. Two weeks ago, Merck's HIV integrase inhibitor won FDA regulatory approval. Gilead investors can either take this step as validation for this particular HIV target or a sign of worrisome competition, since Gilead doesn't plan to start phase 3 dosing of its own integrase inhibitor drug candidate, GS9137, until the first half of next year. Gilead does, however, plan on conducting a head-to-head trial against the Merck compound.

Gilead also plans to catch up in the hepatitis C virus (HCV) antiviral race in the coming years. It's continuing phase 1 clinical trial work on polymerase inhibitor GS9190 and has pushed several protease inhibitor drug candidates into preclinical development.

Hepatitis C drug clinical development happens relatively quickly, so it probably won't be long until we know whether Gilead can change the hepatitis C treatment landscape the way it did with its HIV treatments, or whether another competitor such as Schering-Plough (NYSE:SGP) or Roche will control the HCV oral antiviral drug market with some of their own combination products.

The one weak spot for Gilead so far has been the ramp-up in sales of recently approved pulmonary arterial hypertension (PAH) treatment Letairis. On the third-quarter conference call, Gilead guided for full-year 2007 sales of $15 million for Letairis, which has only been approved in the United States.

The weak sales growth for Letairis in the billion-dollar-plus PAH market mirrors the reception that rival Encysive Pharmaceuticals (NASDAQ:ENCY) is receiving with its similar compound in Europe, and it suggests that perhaps the market for compounds competing with Actelion's Tracleer is not as large as it seems.

But overall, as I mentioned earlier in the year, when its stock was trading in the range of $37 and change, shares of Gilead are undervalued relative to the company's cash flow and drug-pipeline prospects. It's still true, despite a run-up in the stock price of more than 13%, and that's a testament to the strength and promise of its pipeline.

Investors looking for the newest blue-chip drug stock need look no further.

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