Gilead Misses On Top and Bottom Line; Hikes Dividend
Biotechnology firm Gilead Sciences (NASDAQ: GILD – $97.00) said total product sales rose 4% to $7.7 billion, shy of the $8 billion most analysts were predicting. Sales of hepatitis C drugs Sovaldi and Harvoni, totaled $4.29 billion, which was short of the $4.63 billion average Wall Street estimate. On the conference call following the earnings report, the company said the revenue shortfall was primarily due to an increase in discounts required to open up access to patients with lower (liver) fibrosis scores, as well as a modest shift in sales to deeply discounted government payers, including the Department of Veterans Affairs. Gilead’s first quarter net profit fell to $3.57 billion from $4.33 billion a year earlier. Adjusting for one-time items, Gilead earned $3.03 per share in the quarter, compared with the average Wall Street estimate of $3.15 per share and $2.94 a year ago. For full-year 2016, Gilead said it still expects total product sales of $30 billion to $31 billion, in line with the average Wall Street estimate of $30.16 billion. The Board of Directors also approved a dividend of $0.47 per share, up from $0.43.
Shares of the Foster City, California-based company sank after trading hours on the earnings news. However, I think aggressive investors should keep the faith and stay loyal to this issue. Given the company’s substantial cash-generating ability from its hepatitis drugs, I believe it’s only a matter of time before Gilead buys another drug or biotech company with a promising pipeline of products. The shares are also very reasonably valued at 12 times estimated 2016 earnings. In the interim, drug stock prices in general will probably be in a holding pattern until the presidential election is decided, and the issue of high drug prices is resolved.