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What’s the Outlook for Gilead Sciences?

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Analysts’ estimates

Due to the strong performance of Gilead Sciences’ (GILD) blockbuster drugs Sovaldi and Truvada, partially impacted by lower sales of Harvoni, analysts are estimating that Gilead Sciences (GILD) will generate EPS (earnings per share) of $2.62 on sales of $7.1 billion in 4Q16.

Analysts are estimating EPS of $2.60 on sales of $7.1 billion for 1Q17 and EPS of $2.60 on sales of ~$7.2 billion for 2Q17.

Gilead’s gross margin is expected to fall from 89.8% in 4Q15 to 88.1% in 4Q16. Its EBITDA (earnings before interest, tax, depreciation, and amortization) margin is expected to fall from 69.7% in 4Q15 to 67.6% in 4Q16.

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The fall in its gross margin is due to increased cost of sales of products, while the fall in its EBITDA margin is due to the increase in operational costs related to marketing and administration costs as well as the launch of new products. The net profit margin is estimated at around 48.1% for 4Q16 compared to 57.5% for 4Q15.

Annual estimates

Analysts’ estimates show Gilead’s EPS of ~$11.47 for 2016, a fall in EPS to ~$10.78 for 2017, and a further fall to ~$10.44 for 2018. Revenues are expected to fall 7.5% to $30.2 billion for 2016 compared to $32.64 billion for 2015, mainly due to lower sales of the blockbuster drug Harvoni.

Gilead’s gross margin is expected to fall from 90.1% in 2015 to 88.4% in 2016. It’s projected at ~87.8% in 2017 and ~88.8% in 2018. The fall in its gross margin during 2016 is due to increased cost of sales. The EBITDA margin is expected to fall to ~69.2% in 2016 compared to 72.5% in 2015. The fall in its EBITDA margin is due to an operational increase in the marketing and administration costs for new product launches. Its EBITDA margin is also estimated to fall to ~67.9% in 2017.

Net profit margin for 2016 is estimated at 46.2% compared to 55.5% for 2015. The net profit margin is estimated at ~47.0% for 2017.

To divest risk, you can consider ETFs such as the VanEck Vectors Biotech ETF (BBH), which holds ~10.9% of its total assets in Gilead Sciences, 6.4% in Biogen (BIIB), 11.0% in Amgen (AMGN), and 10.9% in Celgene (CELG).

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