Shares of biotechnology provider Gilead Sciences, Inc. (NASDAQ: GILD – $73.13) retreated about 3% after the company put out disappointing 2017 sales guidance. Fourth-quarter adjusted earnings per share was $2.70, above the Street consensus of $2.61, but lower than last year’s $3.32. Although revenue fell to $7.3 billion from $8.5 billion, it was also above analysts’ consensus of $7.1 billion. The company now expects 2017 sales of $22.5 billion to $24.5 billion, less than what Wall Street was estimating at closer to $27.9 billion and below 2016’s $30 billion. Flagging sales for the company’s hepatitis C franchise continues to weigh on the shares. Quarterly sales of hepatitis C drugs Sovaldi, Harvoni and recently Epclusa totaled $3.2 billion, compared with $4.9 billion a year earlier.
Gilead’s HIV franchise remains incomparable and is still the flagship earnings driver. The dividend is decent (2.6% yield) and will likely be hiked. Lastly, a large acquisition cannot be far off with the company’s $12.3 billion cash hoard. The shares are, in my opinion, undervalued and the company’s drug pipeline has improved. I am going to maintain my position in the aggressive account for long-term recovery.