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AQR Capital raises position in Gilead Sciences

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Dec. 24 2014, Updated 10:59 a.m. ET

AQR raises stake in Gilead Sciences

AQR Capital increased its position in Gilead Sciences during the third quarter of 2014. The stock accounts for 1.36% of the firm’s total portfolio, up from 0.08% of the fund’s 2Q14 portfolio.

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Overview of Gilead Sciences

Gilead Sciences is a research-based biopharmaceutical company that discovers, develops, and commercializes innovative medicines for life-threatening illnesses around the world. Gilead’s primary focus areas include:

  • human immunodeficiency virus (or HIV)
  • liver diseases such as chronic hepatitis B virus (or HBV) infection and chronic hepatitis C virus (or HCV) infection
  • oncology and inflammation
  • serious cardiovascular and respiratory conditions

3Q14 results

Gilead Sciences’ total revenues increased to $6.04 billion in 3Q14, compared to $2.78 billion for 3Q13. Non-GAAP (or generally accepted accounting principles) net income was $3.01 billion, or $1.84 per diluted share, compared to $879.1 million or $0.52 per diluted share.

Product sales increased to $5.97 billion, compared to $2.71 billion for the corresponding quarter last year. Sovaldi, a hepatitis C treatment drug, drove this increase. Sovaldi became available in the final quarter of 2013. Sovaldi sales were $2.8 billion in 3Q14 compared to $3.5 billion in 2Q14.

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This 20% decline in revenue is a result of “physicians delaying the initiation of treatments in the US, in anticipation of approval of Gilead developed drug Harvoni.” Harvoni is the first single tablet regimen for patients infected with genotype 1 HCV, the most prevalent genotype worldwide. It doesn’t require supplemental treatment to deal with side effects like Sovaldi does. The FDA approved Harvoni earlier in October.

Gilead also experienced healthy demand in its HIV-focused business. It said, “for all of its products in the US, nine out of 10 HIV patients new to treatment were prescribed the Gilead medicine.”

Initiatives to reach patients worldwide

During the quarter, Gilead signed licensing agreement with seven India-based generic companies to manufacture Sovaldi and Harvoni. These companies have distribution networks in 91 developing countries with more than 100 million HCV infected patients.

Gilead also announced agreement with Medicines Patent Pool (or MPP) under which MPP can sub-license tenofovir alafenamide (or TAF) to generic companies in India and China for manufacturing and distribution in 112 developing countries.

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Product and pipeline update

Gilead launched its first cancer treatment product, Zydelig, which is an oral PI3K delta inhibitor in the US and Europe. In the HIV therapeutic area, the first TAF-based single tablet regimen is in phase 3 studies.

Raised guidance for full year 2014

Gilead revised guidance for 2014 to $22 billion to $23 billion in revenue from its earlier $21 billion to $23 billion guidance. The company expects product gross margins between 86% to 88% from the previous level of 85% to 88%.

AQR Capital’s other 3Q14 positions

During 3Q14, AQR initiated a position in Bally Technologies. It also increased its position in Shire Plc (SHPG), Intel Corp (INTC), Glimcher Realty Trust (GRT), and Biogen Idec Inc. (BIIB). The firm sold positions in AstraZeneca (AZN) and Riverbed Technology Inc. (RVBD).

The next part of this series will explore AQR’s position change in Shire Plc.

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