Gilead’s first quarter results impress

<p>It’s well known that sentiment towards US biotechnology stocks has been somewhat negative recently as investors question high valuations, together with the steep price tags […]</p>

It’s well known that sentiment towards US biotechnology stocks has been somewhat negative recently as investors question high valuations, together with the steep price tags sported by some of the drugs.

Gilead Sciences, which has certainly been at the centre of it all, looks to have provided some pause for thought.

Yesterday (22nd April), the company reported first quarter revenue of some $5bn, that’s double the previous year’s revenue of $2.5bn.

Net income for the period came in at around $2bn, a significant increase over the $722m reported over the same period last year.

While there was growth across all but one of the Gilead’s products, the standout performer – and has equally garnered sufficient buzz – is the company’s new hepatitis C drug (called Sovaldi).

The drug raked in first quarter sales of around $2.3bn for the company – despite expectations of sales of some $1bn, which was already deemed plenty.

Gilead’s Sovaldi price-tag drama

Sovaldi, which was launched in December, is touted to be a safe and effective treatment for hepatitis C infection.

The drug sports a whopping price tag of $84,000 per patient for a standard 12-week course, and that’s not sitting particularly well with some.

Gilead cited high cure rates, in shortened treatment duration, among the reasons that justify the price, following widely-discussed uproar – which reached new heights last month having caught political attention.

That’s believed to have played a role in sending the company’s shares plummeting last month, generously spreading to other players in the sector, on fears that charging less would, of course, impact returns.

Companies elsewhere, which have equally enjoyed a strong run, also felt the chill of the sell-off.

Are Gilead’s latest results likely to ease concerns?

Well, for such impressive results, Gilead’s shares only inched up modestly (up some 2%) – the company is still trading at around 10% below a peak reached back in February.

Concerns over Sovaldi (and indeed overall lofty valuations) may well linger. But there are no concrete efforts on the horizon to dent the price of that drug, for now.

Meanwhile, among other initiatives, Gilead is making progress with Sovaldi outside its homeland (which contributed the bulk of sales).

All that means is that, in the absence of cheaper but just as effective alternatives to Sovaldi from competitors, further strong growth at Gilead remains entirely plausible and that’s unlikely to hurt the company’s shares.

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