Gilead Sciences (GILD: 32.85 -0.15 -0.45%) reported second quarter fiscal 2010 earnings of 81 cents, a penny below the Zacks Consensus, but well above the year-earlier earnings of 65 cents. Revenues increased 17% to $1.93 billion. Foreign exchange (Fx) fluctuations adversely impacted revenues by $16.3 million.
Revenues
Product sales increased 15% to $1.81 billion driven by growth in sales of antiviral products such as Atripla (growth of 26% to $715.8 million), Truvada (growth of 6% to $641.7 million) and Viread (growth of 11% to $176.2 million).
Antiviral product sales for the quarter grew 13% to $1.59 billion. While the US market contributed $887 million (up 14%) to antiviral product sales, Europe contributed $601 million (up 9%). However, we note that antiviral product sales declined on a sequential basis in Europe due to foreign exchange headwind and EU drug pricing pressure,
This is the third quarter in a row in which Atripla recorded higher sales than Truvada. Atripla sales were driven mainly by volume growth in the US and Europe. Meanwhile, Truvada benefited from price increases in the US and volume growth in both the US and Europe .
Other products such as Letairis and Ranexa recorded sales of $60.3 million (growth of 37%) and $60.5 million (growth of 68%), respectively. Cayston, which received approval from the US Food and Drug Administration (FDA) in February 2010, recorded sales of $10.5 million during the quarter.
Gilead’s royalty, contract and other revenues recorded a massive increase of 53.8% to $121.2 million based on higher royalties from Roche related to Tamiflu sales. Tamiflu-related royalties during the quarter were $83.8 million compared with $51.9 million in the year-earlier period. The increase was attributable to the worldwide preparations for combating influenza.
Margin & Expenses
On the operational front (excluding non-recurring items), operating margin improved 260 basis points to 55% primarily on account of an increase in Tamiflu royalties. While R&D expenses remained relatively flat at $207.4 million, SG&A expenses increased 4.8% due to higher headcount and expanded commercial activities.
Share Repurchase Activities
Gilead announced that it has repurchased approximately 44.3 million for $1.69 billion under its new $5 billion share buyback plan that runs through May 2013.
Guidance Trimmed
Gilead cut its outlook for fiscal 2010 once again. The company had earlier lowered its outlook in the first quarter due to the impact of healthcare reform. This time round, Gilead trimmed its outlook to reflect the impact of foreign currency fluctuations.
The company cut its revenue guidance by $100 million and at present expects net product revenues in the range of $7.3 - $7.4 million. While guidance for gross margin and operating expenses remains unchanged, the company raised its effective tax rate guidance from 26.5% to 27.5% (old guidance: 25% - 26%), due to higher than expected US revenue growth and lower than expected revenues in Europe.
Gilead also provided an update on its HIV franchise pipeline candidates and stated that its partner Johnson & Johnson (JNJ: 57.05 -1.53 -2.61%) is on track to submit a New Drug Application (NDA) for TMC278 in the third quarter. Gilead also expects to submit a NDA for its fixed-dose combination of Truvada and TMC278 once the TMC278 NDA is validated.
http://www.gilead.com/
| Analysts' Targets | |
| Stifel Nicolaus | $45 |
| Buy | |
| Tuesday, July 13, 2010 | |
| Morgan Joseph & Co. Inc. | $37 |
| Buy | |
| Monday, February 22, 2010 | |
| Roth Capital Partners | $53 |
| Buy | |
| Friday, February 19, 2010 | |
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