Biotechnology company Gilead Sciences, Inc. (NASDAQ – GILD – $85.19) posted better-than-expected fourth-quarter financial results as sales of its hepatitis C drugs exceeded forecasts. Gilead also boosted its dividend and almost doubled its share repurchase plan. Per share profit beat the Street’s expectations by 35 cents. Gilead earned $3.32 a share as revenue grew 6% to $8.41 billion during the quarter that ended in December. Analysts expected Gilead to earn $2.98 a share on revenue of $8.16 billion. Sales of hepatitis C drugs Sovaldi and Harvoni totaled $4.9 billion compared to the $4.54 billion expected by the Street. Gilead increased its quarterly dividend by 4 cents share, or 9.3% to 47 cents a share. Gilead also announced plans to commence with a $12 billion share repurchase plan after completing its existing $15 billion buyback program authorized in January 2015.
In 2016, Gilead sees net product sales at $30 billion to $31 billion vs. consensus of $31.9 billion. It’s been a rough month for Gilead, with the share falling more than 15%, as long-time CEO John Martin stepped down, to be replaced by John Milligan, the company’s chief operating officer. Add to that, lingering worries about rising competition for its blockbuster hepatitis C medications that generate roughly half of its quarterly revenue and political attacks on industry-wide drug pricing. The recent announcement of a rival Hepatitis C drug from Merck has fueled concern that the market for these drugs has grown too crowded and may become less lucrative. It is widely believed that Gilead needs to do a major acquisition to augment its pipeline.
The outcome of the 2016 presidential election may induce Gilead to lower its prices. But the company has so many other potentially powerful therapies on hand, and generates so much cash flow, it should easily be able to continue its flow of profitable medicines for cancer, cardiovascular, hepatitis and HIV, as well as other anti-viral therapies. The undervalued shares can be held for recovery and modest dividend income.