Reporting solid fourth-quarter earnings, Gilead Sciences Inc. beat consensus estimates, despite less than expected sales of its fixed-dose HIV product, Truvada.
The Foster City, Calif.-based company had total revenues of $609.3 million for the three months ending Dec. 31, a 65 percent increase over the $369.6 million recorded for the fourth quarter of 2004. Net income totaled $281.6 million, or 59 cents per share, 7 cents higher than analyst estimates. For the fourth quarter of 2004, Gilead had a net income of $110.2 million, or 24 cents per share.
The increase "was driven mostly by higher sales of our HIV products and higher royalty revenues from collaborations with our corporate partners," Gilead's chief financial officer, John Milligan, said during a conference call.
Full-year revenue topped $2 billion, and net income for 2005 totaled $813.9 million, or $1.79 per share. As of Dec. 31, Gilead had cash, cash equivalents and marketable securities totaling $2.3 billion.
The company's overall performance was dampened slightly by the lower-than-projected Truvada sales, causing Gilead's stock (NASDAQ:GILD) to drop a few percentage points in after-hours trading Monday. Shares rebounded Tuesday to close at $60.87, up $2.97.
Worldwide sales of Truvada were $191.1 million for the fourth quarter, though that fell short of the $199 million projected by analysts.
U.S. sales of $149 million "were light, possibly due to modest restocking," analyst Jim Reddoch, of Arlington, Va.-based Friedman, Billings, Ramsey & Co., wrote in a research note, though he added that ex-U.S. Truvada sales "are ramping up now that the drug is approved in all the large [European] markets."
Gilead has launched Truvada in 15 countries outside the U.S. Most recently, the drug became available to HIV patients in France and Italy.
Truvada, which combines Gilead's Viread (tenofovir disoproxil fumarate) and Emtriva (emtricitabine) into a single, once-daily treatment, was first launched in the U.S. in the third quarter of 2004. With Truvada's increasing availability, many patients are switching to the simpler regimen, causing a decline in sales of Viread and Emtriva. Viread sales for the fourth quarter totaled $182.4 million, down 8 percent from the $198.8 million in the fourth quarter of 2004. Full-year sales were $778.8 million compared to 2004 sales of $782.9 million.
Sales of Emtriva were $11.2 million for the fourth quarter, a 15 percent decrease from the fourth quarter of 2004. Full-year sales were $47.5 million, down 18 percent from the $57.6 million reported a year ago.
Kevin Young, executive vice president of commercial operations, said research estimates indicated that 114,000 HIV patients in the U.S. were receiving Truvada as of the third quarter of 2005.
"We're also capturing nearly 60 percent of the new patients," he said, adding that the company anticipates "more when we have the Truvada/Sustiva product."
In late 2004, Gilead agreed to collaborate on a proposed single-dose triple-drug regimen that combines Truvada plus efavirenz, marketed as Sustiva by New York-based Bristol-Myers Squibb Co. The companies used bi-layered technology to formulate their two products into a once-daily pill, and expect to submit a new drug application during the second quarter. Under the terms, both companies will fund development work, and will receive revenues based on the percentage of each product's contribution to the final drug formulation. (See BioWorld Today, Dec. 21, 2004, and Nov. 21, 2005.)
Altogether, Gilead's HIV product sales were $384.8 million for the fourth quarter, up 47 percent from $261.7 million in the fourth quarter of 2004. Sales for the year totaled $1.4 billion, a 53 percent increase over 2004 sales of $908.4 million.
In its 2006 guidance, Gilead projects its HIV franchise to pull in sales of about $1.675 billion to $1.75 billion, a 20 percent to 25 percent increase over 2005. However, those estimates do not take into account potential sales from the Truvada/Sustiva product because "we're not certain as to the timelines" for that approval, Milligan said.
Besides its HIV drugs, Gilead also has AmBisome, a treatment for severe fungal infections, which had sales of $55.6 million in the fourth quarter, up 1 percent from a year earlier. Full-year sales totaled $220.8 million, a 4 percent increase over 2004.
Fourth-quarter sales of its hepatitis B product, Hepsera, increased by 43 percent over the fourth quarter of 2004, totaling $51.2 million compared to $35.9 million. Sales for 2005 were $186.5 million, a 66 percent increase over 2004.
During November 2005, Gilead reached a resolution in a royalty dispute with F. Hoffmann-La Roche Ltd. over sales of Tamiflu, which contributed to a 166 percent increase in the company's royalty and contract revenues - totaling $219.1 million - for 2005. As part of the resolution, Basel, Switzerland-based Roche paid Gilead $161.6 million in royalties, including $80.7 million received during the fourth quarter relating to disputed royalties from 2001 to 2003, cost of goods adjustment in 2004, and updated royalties for the first nine months of 2005. (See BioWorld Today, Nov. 17, 2005.)
Tamiflu (oseltamivir phosphate) is approved to treat uncomplicated influenza A and B in patients ages 1 and older, and also as a prophylactic in people 13 years or older who are at high risk during flu season. The product also is being investigated for use in the event of an avian flu pandemic.
Gilead's research and development costs increased by 24 percent to $22.7 million in 2005, and its selling, general and administrative costs increased by 25 percent to $379.2 million. The company now employs more than 1,800 people and recently moved its European headquarters from France to the UK.
On the clinical side, the company is continuing work on its HIV portfolio, which includes GS-9137, an oral HIV integrase inhibitor that has completed a Phase I study and is expected to begin a 200-patient Phase II trial next quarter. Gilead also filed an investigational new drug application for another HIV drug set to begin Phase I studies during the first half of 2006.
An ongoing Phase III program is evaluating tenofovir as a treatment for hepatitis B, and Gilead's partner, New Haven, Conn.-based Achillion Pharmaceuticals Inc. started clinical development last fall of GS 9132 in hepatitis C.