UPDATE:Gilead Sciences 1Q Net +45%; HIV Drug Sales Below Consensus

Gilead Sciences Inc.'s (GILD) first-quarter profit leapt 45%, getting a boost from flu-treatment Tamiflu royalties, though sales of its core HIV drugs fell short of Wall Street forecasts.

The Foster City, Calif., drug maker said Tuesday continued demand for its HIV treatments in both the U.S. and Europe drove sales of combination treatments Atripla and Truvada, but Wall Street was looking for more.

While its drugs sales continue to grow, Gilead's pipeline is closely watched as its biggest drugs are widely expected to contend with generic competition beginning around 2018. The company recently began the first of three late-stage studies of a four-drug HIV combo, known as "the quad," and is working on a triple-combination HIV drug with Johnson & Johnson (JNJ) that is similar to Atripla.

On a conference call Tuesday, Chief Executive and Chairman John Martin said Gilead continued to evaluate opportunities for deals, including those that could add to its pipeline. At the end of March, Gilead had cash and marketable securities of $4.62 billion.

On Monday, Gilead suffered a setback when it stopped a mid-stage study of GS 9450, an experimental hepatitis-C treatment, following "significant laboratory abnormalities and adverse events" in some participants.

For the three months ended March 31, Gilead reported net income of $854.9 million, or 92 cents a share, up from $589.1 million, or 63 cents a share, a year earlier. Excluding items, earnings rose to 99 cents a share, exceeding analysts' expectations of 96 cents a share, according to a survey from Thomson Reuters.

Revenue climbed 36% to $2.09 billion, also just beating a Wall Street projection of $2.07 billion.

On Monday, Gilead lowered its 2010 net product sales projection to a range of $7.4 billion to $7.5 billion, citing the "estimated impact of U.S. Healthcare Reform." In January, Gilead had projected $7.6 billion to $7.7 billion, translating to growth of 17% to 19% for the year.

Shares of Gilead were down 3% to $43.75 in after-hours trading Tuesday.

Wall Street currently expects total revenue for the year of $8.28 billion, which includes revenue from royalties, contracts and other sources, according to Thomson Reuters.

In 2009, the company had product sales of $6.47 billion and revenue of $7.01 billion.

In the latest quarter, the company again benefited from a spike in Tamiflu royalties amid the H1N1, or swine-flu, pandemic. Royalties soared to $246.3 million from $33.2 million a year earlier.

Gilead developed Tamiflu but licensed it to Roche Holding AG (RHHBY, ROG.VX) for royalty payments that it receives with a one-quarter lag.

The company's biggest seller, Atripla, is a triple treatment that consists of Truvada along with Bristol-Myers Squibb Co.'s (BMY) Sustiva. Sales in the quarter rose 36% to $692.9 million, well below Wall Street views of $730 million, according to MDRx Financial, a health-care market research firm.

First-quarter sales of Truvada, which includes two Gilead drugs, rose 11% to $657.8 million, below a Wall Street consensus estimate of $666 million.

The company said that sales of Atripla and Truvada were driven by volume growth in the U.S. and Europe.

Gilead recently launched Atripla in Belgium and Australia, and said Switzerland is the last large "developed market" for HIV treatement. It hopes to enter that country by mid-year, Gilead said.

In the conference call, the company said it has faced pressure from government mandated price reductions in Turkey, France, and Greece during the quarter. Similar moves in Germany could impose an additional 10% cut on prices, which would affect sales later in the year.

-By Thomas Gryta, Dow Jones Newswires; 212-416-2169; thomas.gryta@dowjones.com

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