What will be the big stories on Thursday when Gilead announces its first-quarter results? Here are three things you can expect with the company's Q1 update.
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1. A lot of focus on remdesivir
Earnings, shmearnings. What everybody really wants to hear about is Gilead's antiviral drug remdesivir. It's a pretty safe bet that you'll hear plenty from the company about its experimental COVID-19 candidate in its Q1 update.
Gilead CEO Dan O'Day has previously stated that the biotech would have preliminary results from a late-stage study of remdesivir in treating patients with severe cases of COVID-19 by the end of April and would "work quickly to interpret and share the findings." The company's conference call will coincidently occur on the last day of the month. It's possible if not probable that Gilead will provide an update from its study then.
Investors have had reasons for both optimism and pessimism about remdesivir's prospects in recent days. On April 17, STAT reported that the drug appeared to be successful in treating patients with severe cases of COVID-19 in Gilead's study being conducted at the University of Chicago. Nearly a week later, a draft summary of results from a Chinese study of remdesivir that was inadvertently posted on the World Health Organization (WHO) website indicated that the drug wasn't effective.
Gilead was quick to publicly respond that the document posted temporarily on the WHO website "included inappropriate characterizations of the study." The company's response also noted that the Chinese study was stopped early because of low enrollment and didn't have enough patients for any meaningful conclusions to be drawn from the study.
All of this drama only intensifies the interest in what Gilead will have to say about remdesivir later this week.
2. Revenue and earnings declines
While remdesivir will likely be the biggest story with Gilead's Q1 update, the main point of a quarterly update is to give financial results. Gilead will probably have some less-than-stellar news on this front.
CFO Andrew Dickinson warned in the company's Q4 conference call in February that the first quarter could be disappointing. He said that total product sales in Q1 would likely decline both on a year-over-year and quarter-over-quarter basis.
Is there a reason for investors to be concerned? Not really. Dickinson pointed out that the U.S. has seasonal inventory patterns and lower buying by public payers that ebb in the early part of the year. Also, sales for cardiopulmonary drugs Ranexa and Letairis will undoubtedly be lower due to generic competition.
It's not surprising, therefore, that the consensus Wall Street earnings estimate for Gilead reflects a drop from both the prior-year period and the previous quarter.
3. A still-massive cash stockpile
Gilead reported $25.8 billion of cash, cash equivalents, and marketable debt securities at the end of 2019. You can rest assured that the company's cash stockpile will still be massive when it announces its Q1 numbers.
But what about Gilead's $4.9 billion acquisition of Forty Seven? It didn't close until early April, so the deal won't impact Gilead's cash position as of the end of the first quarter.
Make no mistake, Gilead's huge amount of cash is still very important. The company continues to explore business development deals, including acquisitions, collaborations, and licensing agreements. It's also committed to increasing its dividend.
Looking to the future
Expect Gilead to highlight key milestones that are on the way in its Q1 update as well. The most important of these is the anticipated U.S. and European approvals for filgotinib in treating rheumatoid arthritis. Gilead also awaits regulatory approvals for CAR-T cell therapy KTE-X19 in treating relapsed/refractory mantle cell lymphoma.
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