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Gilead Sciences Expects to See a Revenue Fall in 2017

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Revenue fall

Gilead Sciences (GILD) expects to report net product sales in the range of $22.5 billion–$24.5 billion in 2017—a significant fall compared to its net product sales of $29.9 billion in 2016.

If Gilead Sciences continues to witness revenue falls in 2017, its share price and the price of the iShares NASDAQ Biotechnology ETF (IBB) could see the negative effects. Gilead Sciences makes up ~7.2% of IBB’s total portfolio holdings.

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Revenue projections

Wall Street analysts have projected that Gilead Sciences’ 2017 revenue will be ~$24.6 billion, which is at the higher end of the financial guidance provided by the company for the year.

Gilead Sciences’ revenue and earning from the US market continue to suffer due to falling demand for its top-selling hepatitis C (or HCV) drug, Harvoni. Intensified competition from other HCV players such as Merck & Co. (MRK), AbbVie (ABBV), and Bristol-Myers Squibb (BMY) has also forced Gilead to pay higher discounts to its payers.

These negative trends were partially offset by the robust performance of the HCV drug Epclusa, which reported revenue of $1.6 billion in 2016. The drug was launched in the US market on June 18, 2016. To know more about Epclusa, read Epclusa: Gilead Sciences’s Pan-Genotype Product.

Robust demand for tenofovir alafenamide–based (or TAF) HIV drugs has also helped to partially offset falling revenues resulting from the fall in demand for Gilead’s HCV drugs.

If Gilead Sciences’ non-HCV product sales manage to offset the losses of its HCV product sales, its share price could see a boost, along with the share price of the PowerShares QQQ Trust, Series 1 ETF (QQQ). Gilead Sciences makes up ~1.6% of QQQ’s total portfolio holdings.

International market performance

In 2016, Gilead Sciences reported product sales of $6.1 billion in the European market, a year-over-year (or YoY) fall of ~15%. A lower number of new patients opting for the company’s HCV drugs and unfavorable foreign currency fluctuations were responsible for the revenue fall.

The company, however, witnessed a solid YoY rise of ~31% in its revenue in the Japanese market. Gilead Sciences reported product sales of $2.5 billion in Japan in 2016, mainly due to robust demand for its HCV drugs Sovaldi and Harvoni. 

However, revenue growth in Japan was partially offset by a mandatory price reduction of ~32% that the company had to bear for its HCV drugs starting in March 2016.

In the next article, we’ll discuss 2017 expense projections for Gilead Sciences in greater detail.

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