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Gilead Has A Lot More Explaining To Do

May 01, 2020 3:13 PM ETGilead Sciences, Inc. (GILD)BMY, BMYMP44 Comments
Shock Exchange profile picture
Shock Exchange


  • GILD's Q1 earnings results left some questions unanswered.
  • Its Q1 revenue fell 10% Q/Q. Sales of Descovy for PrEP could be hampered by the effects of COVID-19.
  • The patent infringement lawsuit from BMY could make Yescarta dead money.
  • It could take an incremental $1 billion to manufacture and produce remdesivir to treat COVID-19, yet the incremental revenue is unclear.
  • GILD remains a hold.
  • Looking for more stock ideas like this one? Get them exclusively at Shocking The Street. Get started today »

Source: BarronSource: Barron's

Gilead (NASDAQ:GILD) reported Q1 2020 revenue of $5.55 billion, Non-GAAP EPS of $11.68 and EPS of $1.22. The company beat on revenue and Non-GAAP EPS, but missed on EPS. The stock was down in the high single-digit percentage range in afternoon trading. I had the following takeaways on the quarter.

Growth Appears Dead For Now

Gilead's HIV franchise has been a workhorse for the company over the past few years. It has more than picked up the slack left by the demise of HCV. In Q1 the company generated product sales of $5.5 billion, down 6% sequentially and up 5% Y/Y.

Gilead Q1 2020 revenue. Source: Shock ExchangeRevenue from HIV fell 10% sequentially. Biktrarvy rose 8% after rising 25% last quarter. At $1.7 billion in revenue, Biktarvy is Gilead's top-selling drug and the No. 1 prescribed HIV regimen in the U.S. It has cannibalized sales of other Gilead products, but has also prompted customers to switch from drugs provided by GlaxoSmithKline (GSK).

Traction for Decovy for PrEP could slow. Revenue from the drug was $458 million, up 5% Q/Q. Its growth could not be enough the offset the 47% decline in Truvada. Switches for treatment and prevention patients may have been negatively impacted by COVID-19 as people defer healthcare visits. In April, the company observed reductions in Decovy for PrEP initiations and lower switch volume.

If the economy is in recession territory for a protracted period - and I anticipate it will be - then initiations and switch volume for Descovy could face strong headwinds. Descovy and Biktarvy represented 52% of total HIV sales. Truvada (10% of HIV sales) is expected to face generic competition this year. If the dismal economy trips up Descovy then HIV sales could actually decline for the rest of 2020.

HCV revenue of $729 million rose 16% Q/Q. The franchise has been

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This article was written by

Shock Exchange profile picture
The Shock Exchange has a B.A. in economics and MBA from a top 10 business school. He has over 10 years of M&A / corporate finance experience. Currently head the New York Shock Exchange, financial literacy program based in Brooklyn, NY.His book, "Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead", predicted pain ahead for the U.S. economy and financial markets.In 2014 the law firm of Kirby, McInerney, LLP brought a class action lawsuit against Molycorp, Inc. for "materially misleading statements" in its financial statements. Kirby, McInerney used investigative journalism from the Shock Exchange to buttress its case. That's the discipline the Shock Exchange brings to every situation he covers for SA.

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Comments (44)

Oyat profile picture
Come on guys. If you disagree with SE, make your case below. Better yet, become a contributor and publish your own views. Some of the comments below are just silly.
mosky moc profile picture
@Shock Exchange
is shocking the street available through a non-seeking alpha form?
Shock Exchange profile picture
@mosky moc

You should subscribe to it. It is in conjunction with SA. It is where SE posts exclusive ideas.

@mosky moc
From that kinda-sorta response, it appears the answer is "no".
Shock Exchange profile picture

You can simply subscribe and find out.

Until the hype about remdesivir the last few weeks, GILD has been in a downtrend since June of 2016, I'm surprised how passionate the longs here seem to be.
mosky moc profile picture
always be wary of permabulls. they don't have the experience or knowledge to value companies properly
Shock Exchange profile picture

The Shock Exchange's "hold" rating helped drive the stock up, yet bulls never thanked him.

calstang66 profile picture
I am all in, GILD to $94+ on Monday am.
— 6:07 PM ET 05/01/2020
The U.S. Food and Drug Administration on Friday granted emergency use authorization for the antiviral remdesivir to treat COVID-19.

Although clinical trials of the drug for treatment of the novel coronavirus, SARS-CoV-2, have produced mixed results, the largest study to date suggested that up to 50 percent of those given the drug for a five-day period showed improvement in symptoms.

Roughly the same percentage were well enough to be discharged from the hospital within two weeks of receiving their first dose of the drug, which is delivered intravenously.

The agency said the drug has not been approved as a general treatment for COVID-19. Rather, it is only intended for emergency use on severely ill patients who have been hospitalized.

"Today's action is an important step in our efforts to collaborate with innovators and researchers to provide sick patients timely access to new therapies where appropriate, while at the same time supporting research to further evaluate whether they are safe and effective," FDA Director Stephen Hahn said in a statement.

The larger study, conducted by the drug's manufacturer Gilead Sciences ( GILD
), found participants who received the drug within 10 days of symptom onset had improved outcomes compared to those treated after more than 10 days.

The time to clinical improvement for 50 percent of patients was 10days on a five-day regimen of the drug and 11 days for patients on a 10-day regimen.

By day 14 of treatment, 65 percent of the participants in the five-day treatment group and 54 percent in the 10-day treatment group achieved clinical recovery.

By day 14, 62 percent of patients treated early were also able to be discharged from the hospital, compared with 49 percent of patients who were treated late, Gilead said.

Another study published earlier this week by The Lancet found that COVID-19 patients treated with remdesivir were twice as likely to develop severe breathing problems, including acute respiratory distress syndrome, than those treated with placebo.

However, the study also said that those given the drug recovered up to five days faster than those who received standard care without it.
Kershaw profile picture
SE needs to find a new dog to kick...
Shock Exchange profile picture

The Shock Exchange rated GILD a hold. What more do you want?

Atheist profile picture
Some bulls are only happy with buy ratings, just like some bears only want to hear bad news.
There are others who appreciate views that are different from their own, provided that they are argumented properly.

Your title fits with this comment from Michael Yee/Jefferies at the earnings call:
"A billion] [ph] of expenses and not knowing the revenue, its an interesting position."

Gilead does have to explain how they plan to market RDV.
Shock Exchange profile picture

GILD's CEO is being cheeky, in SE's opinion. He cannot say GILD will make a mint off of a pandemic, yet stockpiling will likely help sales.

Congratulations on making a anti viral drug to the market to fight against COVID-19, even if it does not reduce viral load and improve survival, and causes significant liver damage! The world is saved. We will all go out to party tonight!
It doesn’t cause significant liver damage. Just increases the enzymes. Like ibuprofen does. You’re a winner.
Shock must be desperate for clicks. Just more foolishness from him. Gilead Officials as I write are in the White House as their trial appears to have worked and now is approved to be used for folks in the hospital with covid19. Thank You GILEAD!

All Shock should have written is---THANK YOU GILEAD! At least their is some hope for folks on ventilators thanks to the good folks at GILEAD!
They have a drug that can save the world now. They beat earnings estimates, what is this short seller rubbish.
Really? I believe the writer has also a lot more explaining to do.. some parts are really ridiculous.

I really see things objective and also criticize some points here and there. But this kind of analysis seems normal these days. Minimal upward trends of bad results & news are shown extremely positive. On the other hand if you deliver normal results (some more solid or less) and you highlight future impacts in a transparent way and not hide something you are put in a garbage bin.

Because there way more to explain. Yes they will and can say more in Q2 as they mentioned also yesterday.

Well they have about 24 billion 660 million more in their checking account than I do, which they have earned through past business success so I'm not requiring a big "splainin".

I like companies that earn money and have decent balance sheets and kick ass confronting viruses that are killing people throughout the world. I'll hold.
Vlae Kershner profile picture
Agreed. I keep hearing him saying 'splainin' in a Ricky Ricardo voice.
Yet they won’t use any of that cash to do buybacks or increase dividends. While shareholders are languishing sub 85, the board has given themselves luxury compensation. Look it up on their last balance sheet. For 1 quarter they received 1.1 billion in salary, stock, and bonuses. What did shareholders get? -2 billion for all the drugs they’re giving out
I am using the volatility in this stock to trade around my core position and make money while I wait for it to go up. So my gratitude to articles like this that say nothing but still add to the volatility. I think they call this click bait?

And btw, the CEO is in a tough position of public relations and giving shareholders the profits we deserve. He was very clear in CNBC about making money on Remdesivir this AM (and on yesterday's call) but apparently he was too subtle for the analysts. He can't come right out and say we are gonna make a ton of cash on people's sickness... The man has class.
This man is going to destroy the company. O’day thinks he’s going to play hero for big pharma but that’s a lie. Nobody likes big pharma regardless of what they do or how much they charge. It goes t matter if the drug is 1 million dollar or 1 cent, someone in congress is going to complain. Just accept that nobody likes big pharma and act accordingly. You think people in congress aren’t going to complain when they find out the drug is $1 a dose. Just go charge as much as you can and make as much money in a short amount of time as you can. That is your shareholder fiduciary duty
@Late to the Party I share your frustration but nothing we can do. We all believe in the long term picture so this one just requires some patience. Once the hype dies down they can start charging but right now too many people are looking at Gilead. In the meantime they pay an average dividend and their are daily trading opportunities thanks to the rangebound volatility.
You my friend the only sensible commentator here...good job for catching the CEO bit. Yes gild will see +100 soon
Doctor_ECE_Prof profile picture
I don't understand why Fauci talking up their drug (may be that is why he served under six presidents) given what I see in this article from pulmonary critical medicine:
And an observation based on a lancet study(which is negative on this drug):
"What's interesting is that there was no change in viral load -- Look at the graphs. Million drugs with biologic plausibility that never showed real benefit, but never a drug without biologic plausibility being exciting "
Investing With Confidence profile picture
Good point but remember the viral load measurements are based on the polymerase chain reaction done on swabs taken from the inner surface of the throat, not from the blood.

The drug wont be present at full concentration on epithelial surfaces where swabs are taken.

And even if the drug arrives on the surface and kills the virus, the RNA will still be there and be picked up by the PCR test.

So the lack of reduction in the PCR viral RNA count is not an utter disaster. It has a plausible innocent explanation.
calstang66 profile picture
You don't understand why Fauci is talking up the drug? Here is why, because the study you referred is the only study that showed no benefit from Rendesivir, AND, that study was performed in CHINA! Which China, Communist China, the country that has a drug similar to, and competing with Remdesivir. Why do you only refer to one trial of China? Why do you only refer to a negative report on Remdesivir? All studies not performed in China, show benefits, quicker recovery, fewer death, and/or just simple recovery when Remdesivir was administered.
When you see a title like this on a SA article about Gilead, you can pretty much guess who wrote it.
You didn’t mention Filgotnib in your report, seems like you might be overlooking the elephant in the room.
Same here, I took a pass on the story after the introductory comments, too much is up in the air at this particular time to pass judgement, so I remain long GILD.
ckarabin profile picture
Not a single mention of filgotinib even though it is under FDA review on an accelerated basis and best in class profile. But the author talks about no growth. Well, if you want to ignore the biggest growth engine they have, yes, I guess there is no growth then.
FDA officially approved its use. I don’t see the problem now.
Nettligent profile picture
Gilead is a speculation stock to take advantage of coronavirus, hypes, pump, and dump.
KingofKings profile picture
Speculation on the largest pharmaceutical company in the world? Interesting. Take a look at their pipeline.
Investing With Confidence profile picture
It isn't the largest, is it?

Currently it is #16.

KingofKings profile picture
I stand corrected. #13 by market cap.
Robbe Delaet profile picture
Please explain to me why it would be relevant to compare revenues QoQ and not YoY as HIV sales are somewhat seasonal.
Revenues increased by 6% YoY.

You got some explaining to do as well, Shock Exchange...
The explanation is that SE doesn't like Gilead, so he always makes sure they put their worst foot forward.
Do_Diligence_Now profile picture
clickbait sorry, won't read it.
long gild
TheOpeningBell profile picture
You care enough to invest in a company but are so indifferent to even bother to read a decent analysis. Why even bother commenting?
Do_Diligence_Now profile picture
no time to reply properly, but as you can see, I am not the only one seeing the title as click bait.
no offence.
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