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Gilead Sciences Reiterated 2019 Margin and Tax Rate Guidance

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May. 6 2019, Published 8:12 a.m. ET

Margin guidance

In its first-quarter earnings press release, Gilead Sciences (GILD) reiterated its fiscal 2019 non-GAAP product gross margin of 85% to 87%. Analysts expect Gilead Sciences’ gross margins to rise YoY by 236 basis points to 86.14% in fiscal 2019, then fall by 67 basis points to 85.47% in fiscal 2020, and again rise by 64 basis points to 86.11% in fiscal 2021.

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Analysts also expect Gilead Sciences’ gross margins to rise YoY by 157 basis points to 86.09% in the second quarter, 39 basis points to 86.29% in the third quarter, and 763 basis points to 85.94% in the fourth quarter of fiscal 2019.

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Margin performance in the first quarter

In the first quarter, Gilead Sciences reported a non-GAAP gross margin of 87.3%, a YoY rise of 100 basis points and a sequential rise of 940 basis points. According to the company’s first-quarter earnings investor presentation, the strong YoY performance was attributable to the change in HIV product mix mainly driven by the robust uptake of Biktarvy.

Tax rate

In its first-quarter earnings press release, Gilead Sciences reiterated its fiscal 2019 effective tax rate guidance of 20%–21%. In the first quarter, the company reported a tax rate of 16.7%, a YoY decline of 610 basis points.

SG&A and R&D expenses

In its first-quarter earnings press release, Gilead Sciences reiterated guidance for SG&A (selling, general, and administrative) expenses of $3.9 billion and $4.1 billion and R&D (research and development) expenses of $3.6 billion and $3.8 billion for fiscal 2019.

In the first quarter, the company reported non-GAAP SG&A expenses of $962 million, a YoY rise of 9%. According to the first-quarter earnings conference call, the increase in expenses was driven by higher promotional spending in the US market as well as spending associated with increased expansion in Europe and Japan.

In the first quarter, the company reported non-GAAP R&D expenses of $871 million, a YoY rise of 7%. According to the first-quarter earnings conference call, the increase in expenses was driven by higher investments in the company’s cell therapy programs.

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