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How’s Gilead Sciences Expected to Perform in 2016?

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Fiscal 2016 performance expectations

Gilead Sciences (GILD) lowered its guidance for fiscal 2016 due to weak 2Q16 results reported on July 25, 2016. Now, the company expects its 2016 revenues to be $29.5 billion–$30.5 billion—compared to its previous guidance of $30 billion–$31 billion. This compares to ~$32.6 billion in revenues reported in 2015. Gilead Sciences expects its 2016 growth to be weighed down by continued weakness in HCV (Hepatitis C) sales due to the negative impact of price declines, slowing patient starts, and stiff competition from Abbvie (ABBV) and Merck’s (MRK) competing drugs in the market.

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Gilead Sciences increased its R&D (research and development) expense guidance—driven mainly by acquisition-related expenses. The selling, general and administrative expenses are estimated to be lower than the previous guidance. Gilead Sciences also increased its diluted EPS impact of mainly stock-based compensation and acquisition-related expenses. The company expects this impact to be $1.47–$1.53.

According to analysts’ estimates, Gilead Sciences will register revenues of around $30.5 billion in 2016—a YoY (year-over-year) fall of around 6.5%. The adjusted diluted EPS should come in at around $11.8—a YoY fall of around 1.2%.

Quarterly guidance

According to Wall Street analysts’ consensus estimates, Gilead Sciences’ 3Q16 revenues are estimated to fall by ~9.3%. This outlook compares to the 5.7% YoY revenue fall reported in 2Q16. The sales in 3Q16 are expected to be weighed down by the sales weakness due to discounts and rebates provided for the company’s HCV drugs and an increase in the company’s R&D expenses. For more details on the pricing pressures for HCV drugs, read Behind Gilead Sciences’ Pricing Pressures for HCV Drugs in the US.

According to analysts’ projections for 2016, Gilead Sciences’ competitors Amgen (AMGN), Celgene, and Abbvie can expect to register YoY revenue growth of ~0.3%, 21.4%, and 10.1%, respectively, in their next quarters. One of the major healthcare ETFs, the Health Care Select Sector SPDR Fund (XLV), has around 4% exposure to Gilead Sciences.

Next, we’ll look at analysts’ recommendations for Gilead Sciences.

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