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Gilead: Reality Bites

Summary

Gilead's Q1 earnings were a disappointment as HCV sales fell 12% Q/Q.

I scored big on a straddle I entered into just prior to earnings.

Japan will continue to provide headwinds.

I won't touch GILD until potential HCV discounts to health insurers are priced in.

I have been a Gilead (NASDAQ:GILD) bear for several months now. The Pharm has peaked and the staunchest bulls are becoming believers; reality bites. Q1 results may have confirmed it after HCV sales fell short of expectations by about $300 million. GILD is down over 10% since Thursday's earnings release. I had the following takeaways on the quarter:

HCV Sales Were Disappointing

Total product sales were off 9% sequentially. HCV sales were down 12% while Atripla and Truvada also fell.

Sales of Atripla and Truvada are expected to be eroded by single-tablet HIV treatments like Stribild and Complera. In total, all four drugs generated $2.4 billion, representing 32% of total revenue. They make Gilead less dependent upon HCV sales, which is a good thing. It would be better if their revenue actually grew.

Meanwhile, HCV product sales disappointed; they represented 55% of total revenue in Q1, down from 58% in Q4 and a peak of 61% in the year-earlier period. I am on record that the pharm has peaked but even I was taken aback by the 12% sequential decline this quarter.

United States

U.S. HCV sales of $2.1 billion were off 15% compared to the $2.4 billion generated last quarter. Congress has allocated $1.5 billion to the...


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