Gilead Sciences (GILD) reported strong first quarter fiscal 2010 results with revenues increasing 36% year-over-year to $2.09 billion. The company’s earnings per share (EPS) came in at 92 cents. However, excluding non- recurring items and treating stock-based compensation as a regular expense, the company’s EPS of 95 cents surpassed the Zacks Consensus Estimate of 91 cents and the year-ago period’s 63 cents.


Gilead’s robust growth was driven by strong product sales, especially the antiviral franchise. Product sales increased 24% to $1.79 billion driven by growth in sales of antiviral products such as Atripla (growth of 36% to $692.9 million), Truvada (growth of 11% to $657.8 million) and Viread (growth of 13% to $180.7 million). Healthcare reform impacted product sales by $29.4 million during the quarter.

Antiviral product sales for the quarter grew 19% to $1.60 billion. This is the second quarter in a row, where Atripla recorded higher sales than Truvada. Other products such as Letairis and Ranexa recorded sales of $55.5 million (growth of 40%) and $51.2 million, respectively.

Cayston, which received approval from the US Food and Drug Administration in Feb 2010, recorded sales of $2.9 million during the quarter.

Gilead’s royalty, contract and other revenues recorded a massive increase of 259% to $297.8 million based on higher royalties from Roche (RHHBY) related to Tamiflu sales. Royalties from Tamiflu during the quarter were $246.3 million compared to $33.2 million in the corresponding period last year – a robust increase (642%) attributable to the worldwide preparations to combat swine flu.

Margin & Expenses

On the operational front (excluding non recurring items), operating margin improved 460 basis points to 57.4% primarily on account of an increase in Tamiflu royalties. R&D expenses increased 26% due to higher headcount and increased costs to support various R&D activities. In addition, SG&A expenses increased 24% due to higher headcount and expanded commercial activities.


Based on its robust performance, Gilead further strengthened its balance sheet. The company exited the quarter with $4.62 billion of cash, cash equivalents and marketable securities compared to $3.90 billion at the end of December 2009. In Jan 2010, Gilead announced a $1 billion share repurchase program of which $837.5 million remained unutilized at the end of the quarter.


Although Gilead has posted a strong quarter, it has had to lower its outlook for 2010 due to the healthcare reform. The company expects net product revenues of $7.4 – $7.5 billion compared to the earlier guidance of $7.6 – $7.7 billion, provided along with fiscal 2009 results. However, guidance for gross margin, operating expenses, tax rate etc. remains unchanged.

We are currently Neutral on the stock.

Read the full analyst report on “GILD”
Read the full analyst report on “RHHBY”
Zacks Investment Research