Gilead Sciences beats Street 3Q forecasts
LINDA A. JOHNSON
Oct. 27, 2015
Propelled by skyrocketing sales of its breakthrough hepatitis C pills, Gilead Sciences Inc. posted an impressive 68 percent increase in third-quarter profit and hiked its revenue forecast yet again.
The Forest City, California, company has what amounts to a license to print money in its Harvoni, the first once-daily, single-pill regimen for hepatitis C, and predecessor drug Sovaldi, both launched in the last two years.
The two are on track to bring in nearly $20 billion this year and together vaulted Gilead from the world's 20th-biggest drugmaker in 2013 to No. 9 last year. But their high prices — about $95,000 and $84,000 for a course of treatment, respectively — have triggered continuing criticism, partly because an estimated 4 million Americans and more than 90 million people worldwide have the liver-destroying virus, so covering that cost is a budget buster for insurers as well as patients.
The two drugs dominate the market over rival AbbVie Inc.'s Viekira Pak, a multi-pill regimen, but new competitors, such as one from Merck & Co., could hit the market as early as January and cut into Gilead's gold mine.
Harvoni and Sovaldi can cure more than 90 percent of patients in eight to 12 weeks, compared to the prior generation of treatments that lasted a year, required frequent injections that caused nasty flu-like side effects and still barely cured half of patients.
Gilead said net income rose to $4.6 billion, or $3.06 per share, from $2.7 billion, or $1.67 per share, a year earlier. Adjusted earnings per share came to $3.22; analysts surveyed by Zacks Investment Research were expecting $2.90 per share.
Revenue jumped 37 percent, to $8.3 billion from $6.04 billion in 2014's third quarter.
Gilead shares rose 2.1 percent in regular trading, to $110.96, then gave back 2.3 percent in after-hours trading, falling to $108.70.
Sales of Harvoni, launched late last year, hit $3.33 billion, an astounding total for a new drug to rack up in such a short time. Sovaldi sales are being trimmed as more patients and doctors choose Harvoni, but it still had sales of $1.5 billion.
Edward Jones analyst Ashtyn Evans wrote in a note to investors that hepatitis C sales exceeded estimates by roughly $250 million, and sales across most other major drugs also were higher than expected, while operating expenses were lower than expected.
"We believe investors will remain focused on the company's ability to generate long-term growth as hepatitis C sales are expected to decline in the coming years," she noted.
That's because there was a surge of new patients starting on Harvoni right after its launch at the end of last year, and the company expects that to level off in the fourth quarter.
"Looking ahead, we believe that Harvoni and Sovaldi revenues will be constricted by country-specific budgets rather than the number of (appropriate) patients," CEO John Martin told analysts on a conference call.
The company was once known mainly for its HIV drugs, which dominate that market. Even with five of them on the market — Truvada, Atripla, Stribild, Complera and Viread — their combined sales of about $2.9 billion in the third quarter have taken a back seat.
But Martin said three new HIV combination treatments are awaiting approval by U.S. and European Union regulators, one could be approved next week and all three could be approved in the next six months.
That should help compensate for the older HIV drugs approaching their patent expiration, Evans noted.
Gilead increased its 2015 revenue forecast for the third time this year. It's risen from a range of $26 billion to $27 billion in February to the current $30 billion to $31 billion. Gilead's profit forecast hasn't changed, though, from the initial 82 cents to 87 cents per share.
During the quarter, Japan approved sales of Harvoni, the first once-daily single tablet regimen for the treatment of hepatitis C genotype 1 infection.
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This story has been corrected to show the correct analyst estimate for earnings per share.