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Gilead Sciences Misses Estimates; Reiterates Outlook

Shares of biotechnology firm Gilead Sciences, Inc. (NASDAQ: GILD – $72.56) are falling about 5% in after hours trading following its report of first quarter sales and earnings that missed Wall Street’s expectations. Foster City, California-based Gilead reported a lower quarterly profit than last year as sales of its flagship hepatitis C drugs, fell by a greater-than-expected 59%. The company said it earned $1.48 a share in the first quarter excluding onetime items. Analysts, on average, expected an adjusted profit of $1.67 a share. Revenue fell 22% to $5.088 billion from last year’s $6.377 billion, and below the $5.4 billion consensus.  Sales of other antiviral and HIV drugs rose slightly to $3.33 billion from $3.27 billion. Other product sales, which include Letairis®, Ranexa®, AmBisome® and Yescarta®, were $626 million for the first quarter  compared to $536 million for the same period last year.

       I am looking for the decline to continue through 2018, as competitors continue to take market share. By 2019, however, we ought to see the beneficial effects of the Kite acquisition rejuvenating top and bottom-line growth. Gilead spent $11.9 billion to acquire Kite for its chimeric antigen receptor t-cell (CAR-T) therapies. By 2021-2023, Gilead ought to be able to generate about $6 billion in sales from these therapies and should go a long way toward offsetting what is anticipated to be a reduction in sales from the antiviral franchise. Also, GILD has $32.1 billion of cash and cash equivalents on its books, ripe for another possible acquisition. For the year, Gilead reiterated its outlook, estimating revenue of $20 to $21 billion, while analysts expect revenue of $21.27 billion and full-year adjusted earnings of $6.47 per share. The company also maintained is $0.57 per share dividend, yielding 3.2%. For those investors willing to wait out the story, shares can be maintained for now.

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