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Why Is Gilead (GILD) Up 1.9% Since Last Earnings Report?

It has been about a month since the last earnings report for Gilead Sciences (GILD). Shares have added about 1.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Gilead due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Gilead Q3 Earnings Beat, Trodelvy Fuels Oncology Sales

Gilead topped earnings and sales in the third quarter as lower tax expenses boosted the bottom line. The company also raised its annual guidance.

GILD reported third-quarter adjusted earnings of $2.29 per share, which comfortably beat the Zacks Consensus Estimate of $1.91 and increased from $1.90 in the year-ago quarter. Lower tax expenses drove the year-over-year increase.

Total revenues of $7.1 billion beat the Zacks Consensus Estimate of $6.8 billion on solid oncology sales. Revenues were flat year over year, driven by increased sales in oncology and HIV, which was partially offset by lower COVID-19 drug Veklury (remdesivir) and chronic hepatitis C virus (“HCV”) product sales.

Quarter in Detail

Total product sales were flat at $7 billion in the quarter under review. Excluding Veklury, product sales increased 5% year over year to $6.4 billion due to increased sales from HIV and oncology franchises.

HIV product sales increased 4% year over year to $4.7 billion, reflecting higher demand. Sales missed the Zacks Consensus Estimate by 0.55% but beat our model estimate of $4.6 billion.

Biktarvy sales increased 12% year over year to $3.1 billion, reflecting higher demand as well as favorable channel inventory. Its sales were up 4% sequentially, beating the Zacks Consensus Estimate and our estimate of $3 billion.

Descovy (FTC 200 mg/TAF 25 mg) sales increased 2% year over year to $511 million, primarily driven by higher demand, partially offset by pricing dynamics in the United States. However, Descovy sales missed the Zacks Consensus Estimate of $522 million and our model estimate of $521.9 million.

The Liver Disease portfolio sales, which include chronic HCV, chronic hepatitis B virus and chronic hepatitis delta virus, decreased 10% year over year to $706 million, as higher HCV patient starts were more than offset by unfavorable pricing dynamics.

Cell Therapy product sales increased by 22% year over year to $486 million. However, it missed the Zacks Consensus Estimate of $498 million and our model estimate of $516.2 million.

Yescarta sales increased 23% year over year to $391 million on increased demand in the second- and third-line settings for relapsed or refractory large B-cell lymphoma outside the United States.

Tecartus sales increased 18% year over year to $96 million, driven by increased demand in adult R/R B- mantle cell lymphoma and R/R adult acute lymphoblastic leukemia.

Breast cancer drug Trodelvy’s sales surged 58% year over year to $283 million, primarily driven by higher demand in both the United States and Europe. Per the company, Trodelvy remains the leading regimen for second-line metastatic triple-negative breast cancer across both the U.S. and Europe. Sales missed the Zacks Consensus Estimate of $284 million but beat our model estimate of $278.2 million.

Veklury sales decreased 31% to $636 million, primarily driven by lower rates of COVID-19-related hospitalizations.

Adjusted product gross margin declined to 85.9% for the quarter, down from 86.8% in the year-ago quarter due to intangible asset amortization expenses related to the pretreated HR+/HER2- metastatic breast cancer indication for Trodelvy following its approval in February 2023 as well as product mix.

Research & development expenses were $1.5 billion, up 25% year over year due to increased clinical activity, as well as costs associated with the discontinuation of two phase III magrolimab studies.

SG&A expenses were $1.3 billion, up from $1.2 billion in the year-ago quarter, driven by increased commercial activities in oncology.

2023 Guidance Increased

Product sales are projected to be between $26.7 billion and $26.9 billion (previous guidance: $26.3-$26.7 billion).

Total product sales, excluding Veklury, are expected to be $24.8-$25 billion (previous guidance: $24.6-$25 billion).

Total Veklury sales are estimated at around $1.9 billion (previous guidance: $1.7 billion).

Adjusted earnings per share are anticipated in the range of $6.65-$6.85 (previous guidance: $6.45-$6.80).

Other Updates

The European Commission approved Trodelvy as a monotherapy for the treatment of adult patients with unresectable or metastatic HR+/HER2- mBC who have received endocrine-based therapy and at least two additional systemic therapies in the advanced setting.

The FDA and European Commission approved the label expansion of Veklury to treat COVID-19 in appropriate patients with mild to severe hepatic impairment.

Gilead earlier discontinued the late-stage ENHANCE-2 study of magrolimab in first-line acute myeloid leukemia (“AML”) with TP53 mutations based on an ad hoc analysis and following a review by an independent data monitoring committee. The FDA had previously placed a partial clinical hold on magrolimab studies in AML that paused enrollment, though previously enrolled patients may continue to receive the study medicine.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -10.3% due to these changes.

VGM Scores

At this time, Gilead has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Gilead has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Gilead belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Blueprint Medicines (BPMC), has gained 22.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Blueprint Medicines reported revenues of $56.57 million in the last reported quarter, representing a year-over-year change of -14.3%. EPS of -$2.20 for the same period compares with -$2.23 a year ago.

Blueprint Medicines is expected to post a loss of $2.02 per share for the current quarter, representing a year-over-year change of +23.8%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Blueprint Medicines has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.

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