Gilead Sciences Bombs

Gilead Sciences ($GILD) just reported an awful quarter. Man, this one was UG-LEE!

GILD earned 87 cents per share for Q1 which was a full ten cents below the Street’s expectation. Revenue dropped 7.7% to $1.93 billion which was $100 million below the Street’s estimate.

Sales of HIV drug Truvada rose 2 percent to $673.1 million, while sales of Atripla rose 7 percent to $744.5 million — but the totals fell short of respective average analyst estimates of $688 million and $793 million.

Gilead said U.S. sales were hit by temporary cutbacks at state-funded AIDS drug assistance programs (ADAPs) in Florida and Texas.

“Investors will want clarity on whether this is indicative of a longer-term trend,” said Cowen & Co analyst Phil Nadeau. “Gilead did maintain its full-year guidance, which suggests that this is not an ongoing problem.”

The company still expects full-year product sales of between $7.9 billion and $8.1 billion.

“We believe that the fundamentals of our business remain strong with regard to patient demand and prescription growth in the retail sector,” John Milligan, Gilead’s president and chief operating officer, said on a conference call.

The company’s quarterly adjusted profit of 87 cents per share fell well below the average Wall Street analyst forecast of 97 cents per share, according to Thomson Reuters I/B/E/S.

Gilead attributed the mismatch between U.S. demand and its sales revenue to budget problems in Texas and Florida, adding that the federal government recently set a fiscal 2011 ADAP budget of $885 million — up 6 percent from the prior year.

“The very latest intelligence we have gathered at the state level indicates that there is second-quarter purchasing by ADAP programs, including Florida, within the last week,” said Kevin Young, head of commercial operations at Gilead.

He said he had not heard about renewed buying by the Texas program.

The shares are down after-hours. There are a few brights (I don’t want to overstate this; it was a rotten quarter). First, Gilead is keeping their sales target the same. That’s good to know.

Also, GILD was already very cheap so an earnings miss shouldn’t have a dramatic impact on the shares. Instead of going for 11 times trailing earnings, GILD is now going for 11.4 times trailing earnings.

I still have eight months before I make my 2012 Buy List decisions, but Gilead just made my job a lot easier.

Posted by on April 20th, 2011 at 7:58 pm


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