2023-12-12 13:00:16 ET
Summary
- Gilead Sciences, Inc. had strong quarterly results, with total product sales of $6.3 billion and strong growth in HIV and Oncology.
- The company has several milestones, including the success of Trodelvy with over $1 billion in annualized sales.
- Gilead Sciences is accelerating its cancer business, with over $3 billion in annualized sales and a goal to contribute 1/3 of revenue by 2030.
Gilead Sciences, Inc. (GILD) is among the largest pharmaceutical companies in the world, with a market capitalization just under $100 billion. The company's anti-viral discoveries have gone through multiple phases, with improvements in HIV, followed by a cure for HEP C, and additional COVID-19 drugs.
As we'll see throughout this article, the company's overall portfolio, along with growth in its cancer business, support substantial long-term growth despite a period of struggle.
Gilead Sciences Quarterly Results
The company had strong quarterly results , indicating its continued focus on quarterly performance.
The company's total product sales, not counting Veklury, hit $6.3 billion, with HIV growth of 4% and strong growth in Biktarvy. HIV remains the core of the company's portfolio, and it's nice to see the company's continued dominance there. The company's innovation here, with new drugs like PrEP, help to retain its market dominance.
The bright spot in the company's results was strong Oncology results, with a 33% YoY increase supported by Trodelvy and Cell Therapy, with Trodelvy receiving new market approvals. The company has spent years trying to build a post Hepatitis C portfolio, with several miss-steps, but we feel it's finally back on track.
This was definitely an exciting quarter for the company's long-term potential.
Gilead Sciences Milestones
The company has a number of milestones it's working on that we feel will expand on its prior success.
The company's most exciting milestones center around Trodelvy, a drug that's crossed $1 billion in annualized sales and is expected to cross $4 billion in peak sales . The company has a handful of milestones before the end of the year, many in Phase 2, however, it could help set-up some exciting Phase 3 trials for the upcoming years.
These milestones will define the continued growth of the company's portfolio.
Gilead Sciences Accelerating Cancer Business
The below information provides a closer view of the company's growing cancer business.
While the company spent many billions and still has a ways to go, it's doing well for effectively an acquired business. The results above are the result of almost $40 billion in acquisitions, many of which have been written down. However, for those who invest now, you're already getting the benefit of those write-downs which the market has priced in.
The business currently has more than $3 billion in annualized sales. Combined annual sales forecasts for the 3 products above is more than double that, with a run-rate extending into next decade. The company's guidance that the portfolio is on track to meet the goal of contributing 1/3 of revenue by 2030 is incredibly exciting to see.
However, of course, we'd like to see the company to continue to invest in and develop a pipeline here besides solely what it's spent a lot of money to acquire.
Gilead Sciences Shareholder Returns
Gilead Sciences has modified its guidance several times, and remains committed to shareholder returns.
The company's narrowed current product sale guidance is $26.8 billion. Not counting Veklury (its COVID-19 drug), the company's production guidance is $24.9 billion, a strong guidance from the initial guidance despite continued Veklury weakness. The company's operating income guidance is expected to be $10.6/7 billion, impacted by some higher R&D costs.
At the end of the day, the company's diluted EPS guidance is $6.75 / share, with GAAP diluted EPS at $4.65 / share. Versus the company's share price, that's a non-GAAP P/E ratio of 12. The company is committed to sending a substantial % of its cash to returns. The company's ~$8 billion in annual profits had $1.3 billion in quarterly cash flow.
The company has an almost 4% dividend yield that it's continued with almost $1 billion in quarterly dividends. The company also repurchased $300 million in shares. The company has managed to reduce its outstanding shares consistently, and we'd like to see that continue.
Thesis Risk
The largest risk to our thesis is the company's ability to continue growing the existing assets in its portfolio. Pharmaceuticals is a complicated and expensive business to be in, and the company's write-downs and acquisition failures are a clear example of that. Whether the company can now succeed has luck involved and remains to be seen.
Conclusion
Gilead Sciences might have finally found the diversified portfolio that it's dreamed of. Veklury continues to generate strong sales, providing a nice cushion and some extra cash flow. The company's HIV business continues to grow and remains dominant in the field thanks to its success with patients and continued innovation.
Now the company has two new businesses. Its liver disease business has a dying Hepatitis C business that underpins revenues with growing Hepatitis B and D businesses. We expect these to eventually completely replace the Hepatitis C business. Oncology is much more exciting and remains on track for 1/3 of 2030 revenue.
Gilead Sciences, Inc. continues to have strong positive cash flow directed to dividends and buybacks, and overall, is a valuable long-term investment.
For further details see:
Gilead Sciences Is Building A Diversified Portfolio