Gilead’s Record-Breaking Sovaldi Sales Set the Tone for a Great Quarter

After the markets closed on Tuesday, April 22, Gilead reported strong first-quarter operating results behind robust Sovaldi sales of $2.3 billion—over two times the consensus expectation; exhibit 1, on page 2, provides a complete variance analysis of the company’s results versus our expectations.

Sovaldi sales for the first quarter were $2.3 billion. On Tuesday’s call, management offered insight into the early phases of the Sovaldi launch in the United States and Europe. While stocking and channel fill were not quantified, we believe that it could be several hundred million dollars at a minimum. The drug was approved on December 6, 2013. Based on the strength of the launch, we are materially increasing our estimates, which we outline in exhibit 2, on page 3. We estimate that roughly 30,000 patients have been treated to date, and that there are over 2 million individuals diagnosed with HCV in the United States and Europe and a combined prevalence estimated at about 7 million in the two geographies. We therefore believe that despite the strong start to the Sovaldi launch, further upside remains.

Investors are excited about the potential of idelalisib in indolent non-Hodgkin lymphoma and chronic lymphocytic leukemia settings. The assembly of Gilead’s oncology commercial organization is well underway; we expect idelalisib to reach market as early as 2014.

Gilead is trading at 10.3 times our updated adjusted EPS estimate for 2015 of $7.05. We believe that Gilead has extensive expertise in drug discovery, development, and commercialization. The company has also been extremely active relative to its peers in strategic development. We see strong growth potential driven by greater confidence in HIV market growth, the potential of the HCV and oncology franchises, and accretive revenues from new products, such as Letairis, Ranexa, and other late-stage products. Based on our favorable outlook for the company, we believe Gilead will outperform the market in the near term.


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