UPDATE: Gilead 4Q Profit Slides 22%, Reports Pipeline Delay

Gilead Sciences Inc.'s (GILD) fourth-quarter profit fell 22% as costs rose and year-ago results benefited from flu-related stockpiling. The Foster City, Calif., drug maker also reported a setback in getting its latest HIV treatment to the market.

Gilead said the Food and Drug Administration didn't accept its market application for its single-pill combo of Truvada and TMC278. The news is notable because Wall Street is concerned about the company's pipeline development as several drugs face patent expirations later this decade.

TMC278, or rilpivirine, is an antiviral drug in development by Johnson & Johnson (JNJ). The two companies have a collaboration agreement to develop the combination pill, which is commonly called "B-tripla" on Wall Street, because it is the followup to Gilead's top-selling Atripla pill.

Gilead said the FDA wants more information related to Chemistry, Manufacturing and Controls section of the submission that relates to the Truvada portion of the drug. The company expects to resubmit by the end of March.

Shares of Gilead, which recently fell 1.8% to $37.49 in after-hours trading, are down 17% over the past 12 months and are well off their mid-2008 highs above $57.

Earlier Tuesday, Barclays Capital analyst Jim Birchenough said Gilead's growth in the HIV segment remains dependent on greater expansion of earlier treatment of the disease, something that remains uncertain.

"Given fixed asset life of HIV products and potential generic risks in 2017 and 2020, we expect GILD shares to remain range-bound pending better visibility on pipeline progress," Birchenough wrote in a note to clients.

Looking forward, Gilead expects net product sales for 2011 of $7.9 billion to $8.1 billion. Wall Street currently projects total revenue for the year of $8.43 billion, which includes revenue from royalties, contracts and other sources. In 2010, the company reported product sales of $7.39 billion and revenue of $7.95 billion.

In 2010, Gilead repeatedly cut its full-year projections, citing foreign currency fluctuations and health reform, forcing Wall Street to also lower its estimates.

On Tuesday, Gilead also reiterated that the health-care overhaul would cut its 2011 U.S. product sales by 5% to 6%, a similar amount as the current year, plus an excise tax of $30 million to $50 million. The company said the overhaul hit U.S. net revenue by $200 million in 2010, as expected.

For the three months ended Dec. 30, Gilead reported net income of $629.4 million, or 76 cents a share, down from $802.2 million, or 87 cents a share, a year earlier. Excluding items, per-share earnings were 95 cents a share, equal with analysts' expectations, according to a survey from Thomson Reuters.

Revenue climbed dropped 1.7% to $2 billion, slight ahead of a Wall Street projection of $1.99 billion.

The results in the latest quarter were hurt by higher research and development costs along with acquisition and restructuring expenses, while the year-ago quarter benefited from increased sales of flu treatment Tamiflu, from which it gets royalties from Roche Holding AG (RHHBY, ROG.VX).

The company's per-share earnings were boosted by an ongoing massive stock repurchase plan. In the quarter, Gilead bought $615.4 million in stock. For the year, it bought 109.9 million shares for $4.02 billion, cutting its total shares outstanding by 12%.

Gilead said its board also authorized an additional three-year, $5 billion stock repurchase program. The company had about $5.3 billion in cash, cash equivalents and marketable securities at the end of December.

Third-quarter sales of Truvada, which includes two Gilead drugs, rose 1.7%, to $681.7 million, above a Wall Street consensus estimate of $677 million, according to research firm ISI Group.

The company's biggest seller, Atripla, a triple treatment of Truvada with Bristol-Myers Squibb Co.'s (BMY) Sustiva, had sales rise 11%, to $775.2 million, above a Wall Street view of $765 million.

Gilead said growth in both Atripla and Truvada was driven by increased sales volume in the U.S. and Europe.

Royalty, contract and other revenue in the quarter dropped to $68.4 million in the quarter from $228 million a year ago, primary from lower Tamiflu royalties.

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

Gilead Sciences (NASDAQ:GILD)
Historical Stock Chart
From Jun 2024 to Jul 2024