Gilead has good prognosis for Q4

Promising new products suggest an exciting future for Gilead Science, which is announcing fourth-quarter figures on 3 February after the bell.           

Gilead logo
Source: Bloomberg

Gilead Sciences’s new hepatitis C drug could be the goose that lays the golden egg. The pharmaceutical company has two drugs linked to the treatment of the disease: Sovaldi is the more established, while Harvoni received US regulatory approval in September. Although net profits in the company’s third-quarter tripled, Harvoni is still tipped to be its biggest earner of all-time.

Sovaldi holds the record for having the top-selling launch of a drug in history, but new competition from AbbVie is likely to eat into the company’s futures earning potential. Although Sovaldi had no competition in its early days, the price war between it and Abbvie’s Viekira Pak drug has taken the shine off for Gilead. US regulators approved Abbvie’s drug in December and pharmaceutical analysts are anticipating it will account for 25% of the hepatitis C drug market. Last week Abbvie announced its fourth-quarter figures, and revenue exceeded analysts’ estimates for the fourth consecutive quarter. However, the pharma giant swung to a quarterly net-loss because of costs related to its failed takeover attempt of Shire.

Gilead’s new drug Harvoni has a price tag of more than $1000 but a success rate of between and 94% and 99%, and the drug is poised to outperform Sovaldi in terms of sales. Another drug, Zydelig, which is used to treat three types of blood cancer, also received regulatory approval from the US in July and the EU in September, and will be of further interest to traders.

Gilead will announce fourth-quarter numbers on Tuesday 3 February, and the consensus is for revenue of $6.74 billion and EPS of $2.21.  Last year’s fourth-quarter revenue and EPS came in at $3.12 billion and $0.55 respectively, while the market was expecting revenue of $2.85 billion and EPS of $0.50. Gilead will also report full-year figures on the same day, and dealers are anticipating revenue of $24.32 billion and EPS of $7.88. These forecasts equate to a 117% jump in revenue and a 286% rise in EPS.

Equity analysts are extremely bullish on Gilead; out of the 32 recommendations, 27 are buys, four are holds, and one is a sell. The average target price is $122.04, which is 14.7% above the current price. Investment banks are very bullish on AbbVie, and out of the 20 ratings, 13 are buys and seven are holds. The average target price is $73.00, which is 19% above the current price.

The stock is receiving support at the 50-day moving average of $101.23, and if this level is punctured it will bring the 200-hour moving average of $95.60 into play. Resistance is being met at $108, and move through this will make $116 the target.

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