Wednesday, April 20, 2011

Gilead Sciences Inc. (NASDAQ: GILD): Q1 Earnings Preview 2011

Gilead Sciences Inc. (NASDAQ: GILD), the world's largest maker of AIDS drugs, is scheduled to release its first-quarter ernings after the closing bell on Wednesday, April 20, 2011. Analysts, on average, expect the company to report earnings of 97 cents per share on revenue of $2.04 billion. In the year ago quarter, the company reported earnings of 99 cents per share on revenue of $2.09 billion.

Gilead Sciences, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of therapeutics for the treatment of life threatening diseases worldwide.

The company virtually dominates the HIV/AIDS drugs market. According to Joint United Nations Programme on HIV/AIDS, or UNAIDS, AIDS killed about 1.8 million people globally in 2009. That makes HIV the deadliest infection ahead of tuberculosis and malaria, World Health Organization data show.

Gilead’s portfolio of anti-HIV medicines will remain under patent protection for several more years and given the continued global increase in new HIV cases, that area promises to remain a high-growth field. Still, Gilead, like rivals such as Johnson & Johnson (NYSE: JNJ), Pfizer (NYSE: PFE) and Merck (NYSE: MRK), is scrambling to develop new drugs in-house, while also acquiring smaller companies that own promising pipelines. The company is specifically looking at increasing its presence in the Asian hepatitis B virus (HBV) market, where the infection is quite prevalent. 

In the preceding fourth-quarter, the Foster City, California-based company's net income was $629.42 million, or 76 cents a share, compared to $802.21 million, or 87 cents, a year ago. On an adjusted basis, the company earned 95 cents per share in the fourth quarter. Revenue declined to $2 billion from $2.03 billion. Analysts, on average, expected the company to report earnings of 94 cents per share on revenue of $1.99 billion. 

At its last earnings call in January, the company said that it expects fiscal 2011 product revenue in the range of $7.9-8.1 billion in 2011, reflecting an increase of 7-10% over 2010 product sales. The guidance includes an adverse 5-6% impact from U.S. health care reform, as well as the impact of pricing pressures in some countries in the European Union. Gilead expects gross margins in the range of 74% to 76% in 2011. R&D expenses are expected to be $950 million to $1 billion and SG&A expenses are expected in a range of $1 billion to $1.05 billion. The effective tax rate is expected in the range of 25% - 27%.

Gilead is aiming to broaden its expertise in the fields of oncology and inflammatory diseases. The company is also seeking to counter the loss of revenues through acquisitions. During the quarter in review, Gilead agreed to acquire Calistoga Pharmaceuticals, Inc., a privately-held biotechnology company for $375 million. Gilead anticipates that the deal will close in the second quarter of 2011. Calistoga Pharmaceuticals is involved in the development of medicines to treat cancer and inflammatory diseases. Calistoga could earn up to an additional $225 million if certain milestones are achieved.

The company's stock currently trades at a forward P/E  (fye Dec 31, 2012) of 8.92 and PEG ratio (5 yr expected) of 0.67. In terms of stock performance, Gilead shares have lost nearly 8 percent over the past year.

Full Disclosure: None.
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