Will Increased Competition Hurt Gilead’s Outlook?

The company gave guidance for the 2015 full year. Net product sales are expected to be in the range of $26 billion to $27 billion and gross margin is expected to be 87% to 90%. There are consensus estimates for the 2015 full year of $9.79 in EPS and $28.65 billion in revenue.

The board of directors announced that it had authorized a dividend program where the company intends to pay quarterly dividends of $0.43 per share beginning in the second quarter of 2015. Dividend payments are subject to quarterly declarations by the board of directors.

A share repurchase program of $15 billion in common stock was also approved by Gilead’s board. This new program adds to the currently authorized three-year $5.0 billion repurchase program from May 2014, of which $3 billion remained at the end of December.

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For 2014, antiviral product sales were $22.8 billion compared to $9.3 billion in 2013. The increase in the quarter and full year was primarily driven by sales of Sovaldi. Sovaldi had sales of $1.73 billion globally for the fourth quarter and Harvoni had global sales of $2.11 billion.

Gilead had $11.7 billion of cash, cash equivalents and marketable securities, compared to $2.6 billion as of the end of December 2013. During 2014, Gilead generated $12.8 billion in operating cash flow and utilized $5.3 billion to repurchase shares.

John Martin PhD., chairman and CEO of Gilead, said:

The past year was marked by the launch of our first oncology product, second HCV medication, regulatory filings for the next generation HIV medicine, E/C/F/TAF, and a doubling of product revenues relative to 2013. We are entering 2015 with financial strength, a portfolio of 19 marketed products that are addressing significant unmet medical needs and a pipeline for which we expect a number of milestones and data readouts during the coming year.

In mid-to-late January, a few analysts weighed in on Gilead:

• Needham had a Buy rating with a price target of $120.
• Nomura reiterated a Buy rating with a price target of $146.
• Maxim Group had a Buy rating with a price target of $127.

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Shares of Gilead closed Tuesday up 1% at $107.15. In after-hours trading, after the earnings report was released, shares were down 3.5% at $103.35. The stock has a consensus analyst price target of $122.58 and a 52-week trading range of $63.50 to $116.83.