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Will Strong Veklury Sales Aid Gilead's (GILD) Q4 Earnings?

Biotech major Gilead Sciences Inc. GILD is slated to report fourth-quarter and 2020 results on Feb 4, after market close.

The company has a disappointing track record, with earnings missing estimates in two of the last four quarters and beating in the remaining two, the average negative surprise being 6.24%. In the last reported quarter, the company beat expectations by 15.30%.

Gilead Sciences, Inc. Price, Consensus and EPS Surprise

 

Gilead Sciences, Inc. price-consensus-eps-surprise-chart | Gilead Sciences, Inc. Quote

Let’s see how things have shaped up for this announcement.

Why a Likely Positive Surprise

Our proven model predicts an earnings beat for Gilead this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP for Gilead is +3.89% as the Zacks Consensus Estimate is pegged at $2.06, while the Most Accurate Estimate is pegged at $2.14.

Zacks Rank: It currently carries a Zacks Rank #3.

Factors at Play

Gilead did not provide any guidance for the fourth quarter. Nevertheless, earlier in the month, the company raised its annual guidance for 2020 as the worsening of the coronavirus pandemic drove sales for Veklury (remdesivir). This indicates strong results for the fourth quarter as well.

Total product sales are now expected to come around $24.3-$24.35 billion for 2020, up from the previous guidance of $23-$23.5 billion, primarily driven by increased Veklury sales as hospitalization and treatment rates were higher than expected, given the most recent COVID-19 surge.

Veklury sales are estimated at $2.8-$2.825 billion. We note that the FDA granted full approval to the drug for the treatment of patients with COVID-19 and the European Commission (EC) granted conditional Marketing Authorization to the same. It was earlier granted an Emergency Use Authorization (“EUA”) by the FDA.  Total product sales, excluding Veklury, are projected around $21.5-$21.525 billion for 2020.

Similar to the past quarters, the HIV franchise driven by strong Biktarvy uptake most likely maintained momentum in the fourth quarter. However, the loss of exclusivity of Truvada in the United States and the impact of COVID-19 primarily on Gilead’s pre-exposure prophylaxis (“PrEP”) franchise might have hurt demand.  HIV product sales increased 8% to $4.5 billion for the third quarter of 2020 and similar levels are expected for the fourth quarter. The Zacks Consensus Estimate for sales of Biktarvy and Descovy is projected at $1.9 billion and $635 million, respectively.

HCV sales are likely to have declined in the fourth quarter, a trend continuing for many quarters.

Cell Therapy product sales, which include Yescarta (axicabtagene ciloleucel) and Tecartus (brexucabtagene autoleucel), came in at $147 million in the third quarter of 2020. Sales might have experienced a sequential increase, driven by a higher number of therapies provided to patients and its continued expansion in Europe.  The Zacks Consensus Estimate for Yescarta sales is projected at $182 million.

Other Pipeline & Regulatory Updates

Apart from the regular top and bottom-line numbers, we expect investors to focus on the company’s pipeline updates. 

Last month, the European Commission granted conditional marketing authorization to Tecartus for the treatment of relapsed or refractory mantle cell lymphoma.

Gilead also announced its decision to not seek approval of filgotinib for the treatment of rheumatoid arthritis (RA) in the United States as it does not see a viable path for the same. Filgotinib is already approved and marketed as Jyseleca (200 mg and 100 mg tablets) in Europe and Japan for the treatment of adults with moderately to severely active RA. Consequently, the company and partner Galapagos NV GLPG amended their existing arrangement for the commercialization and development of filgotinib. Further updates on the same are expected on the call.

Share Price Performance

Gilead’s stock has gained 0.6% in the past year compared with the industry's growth of 12.9%.

 

Other Stocks to Consider

Here are some other drug/biotech stocks you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.

Vertex Pharmaceuticals VRTX has an Earnings ESP of +5.39% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alexion ALXN has an Earnings ESP of +12.29% and a Zacks Rank #2.

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