There is indeed a balm in Gilead today—specifically Gilead Sciences (NASDAQ:GILD)—as the company brought out some fresh news that captured investors' attention today, and should hold it for the next several weeks. Gilead Sciences revised its estimates for the full-year 2020, and both its sales and its earnings are looking to take a nice turn upward as a result.
A Hefty Upward Bump
Things were already looking pretty good for Gilead by pretty much any measure. The company was on track for earnings between $6.25 and $6.60 per share, and for overall product sales in the $23 billion to $23.5 billion range.
With the updates, the company has bumped up its product sales figures to between $24.3 billion and $24.35 billion, and its earnings per share into the $6.98 to $7.08 range.
The biggest cause for this upward leap is sales of remdesivir and similar products designed to take on COVID-19. In fact, remdesivir—commonly sold under the brand name Veklury—has its own section on the company's estimates, and looks to bring in around $2.8 billion to $2.825 billion all by itself.
Other details also emerged as the company restated its full-year estimates; for instance, the company originally had a gross margin on products of between 86% and 87%. Now, with the release of the updates, the company can solidify this somewhat at approximately 86.5%. Additionally, the development of remdesivir and similar products required a significant outlay of research and development (R&D) capital.
While originally, R&D expenses looked to take on percentage growth in the “mid-teens”, which would mean somewhere between 13% and 17%, the growth of R&D expenses is now considered to be approximately 20%. The company managed to ameliorate this somewhat by reducing selling, general and administrative (SG&A) expenses, dropping the growth rate from “low double-digit percentage growth” to approximately 10% growth.
Playing to a Tough Crowd
Even as Gilead posts improved numbers, these numbers are playing only minimally well with the broader analyst community. Our latest research shows that Gilead Sciences not only is a “hold” currently, but has been so for the last six months. The ratios making up that assessment, however, do seem to be swinging in Gilead's favor; last month, the company had two “sell” ratings, 15 “hold” ratings, and 10 “buy” ratings. It's almost exactly the same a month later to the present day, but now, there is an eleventh “buy” rating to give the company just a little more bull action.
The price target, meanwhile—which had been in decline for the last five months—is up, and in a big way today. Six months ago, the price target was $79.77 per share, which dropped to $78.93 three months ago and then $76.15 a month ago. Today, the price target is $93.83, and this amid a string of price drops throughout December.
Tackling a Problem Differently
While most of the world has been focused—and strongly, too—on the race for a vaccine, it's surprisingly how little press treatment options have had of late. With a host of different possibilities emerging—everything from the controversial hydroxychloroquine / azithromycin / zinc cocktail to ivermectin to even remdesivir itself—the perceived need for a vaccine should be on the decline. While certainly, there will always be those interested in proactive protection against a disease, there will also be a substantial market of those concerned about vaccines in general and thus more disposed to treatment options instead.
Leaving that topic aside for a moment, the numbers tell a compelling tale of their own. While the R&D expense increase has been substantial, and would likely be a concern to many shareholders, look at the overall picture. Sales and revenues are on the rise as a result of that increased spending, and the company has even taken steps to help reduce the impact by cutting down the SG&A expenses. That should put some real life in the finalized version of the balance sheet when it emerges.
So in summary, its treatment option sure seems to be working well—there are several reports that that's what got President Trump out of the hospital so rapidly when he contracted COVID-19—and with vaccines slowly trickling out, having treatment options on hand instead should be a worthwhile endeavor. For right now, hang on to any shares you've got, and consider picking up some more once all the numbers come out. No matter where you stand on treatment versus vaccine, Gilead's numbers are certainly looking up.
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