Forrest City, California biotech Gilead Sciences, Inc. (NASDAQ: GILD – $70.05) reported fourth-quarter earnings results that fell short of Wall Street estimates as sales of its flagship hepatitis C drugs continued to slide. Revenue decreased to $5.80 billion from $5.95 billion a year ago but beat the analyst consensus of $5.52 billion. Sales of Gilead’s HIV drugs rose to $4.1 billion from $3.4 billion, but sales of hepatitis C drugs fell sharply to $738 million from $1.5 billion in the same period of 2017. The drop was largely expected as these newer drugs have cured many patients with the liver disease and rival products have seized market share. Excluding one-time items, Gilead said it earned $1.44 per share in the period compared to $1.78 last year and analysts’ views of $1.70. The drug maker also estimated 2019 product sales of $21.3 billion to $21.8 billion, below the Street average forecast of $21.8 billion.
With $28 billion of cash on hand, Gilead needs to make a major acquisition to jump-start its aging product portfolio. Absence of any new drug pipeline news, the shares will continue to tread water. If GILD can achieve the $6.77 per share earnings estimate for this year, the stock appears to be well undervalued at its current quotation. In the meantime, Gilead added another 6 cents to its quarterly dividend, bringing the annual payout to $2.52 per share, yielding 3.6%, and management continues to repurchase shares. Under new leadership, I am holding the beaten down stock for its recovery potential.