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3 Key Takeaways Following Gilead Sciences' Second-Quarter Conference Call

Image source: Flickr user Bill Brooks.

Gilead Sciences, Inc.'s (NASDAQ:GILD) second-quarter earnings conference call offered arguably tepid support to long-term investors who are eager to see the company kick-start sales and profit growth. Despite improving results for its HIV drugs, weakness in hepatitis C led to a year-over-year drop in revenue and net income in Q2. Is Gilead Sciences ready to turn things around? Here are three key things to know now that the second quarter is officially in the books.

Cancer expansion is a dud (so far)

When Gilead Sciences launched Zydelig for chronic lymphocytic leukemia in 2014, the prevailing expectation was that the company would soon become a leader in blood cancer treatment. Unfortunately, Zydelig has been plagued by safety concerns that have significantly limited its use, and as a result, its sales represent a fraction of the billion-dollar market.

Zydelig's sales totaled only $41 million last quarter -- a far cry from rival Imbruvica, which won FDA approval for use in CLL around the same time as Zydelig and is generating sales at an annualized run rate of $1.3 billion.

Zydelig has been such a disappointment that Gilead Sciences management didn't even bother mentioning it during its earnings conference call with investors last night. In fact, oncology itself was mentioned only three times, and that was because a Wall Street analyst asked about it.

Although it appears that Gilead Sciences' interest in oncology has cooled, management hasn't given up on the indication altogether. Results from a phase 3 study of momelotinib in myelofibrosis, an uncommon leukemia, should be available later this year and could lead to a filing for approval in 2017.

CEO John Milligan also said he is "committed" to the indication and he's interested in "assets, collaborations, and partnerships." That could mean he'll consider deals that fortify Gilead Sciences' cancer-drug pipeline. A dramatic slowing in the company's pace of share buybacks adds fuel to that thinking. In Q1, the company spent $8 billion buying back its stock, but management repurchased only $1 billion in stock during Q2.

Absent a deal, however, Gilead Sciences appears to be more focused on other pipeline candidates than it is on oncology. Specifically, drugs targeting nonalcoholic steatohepatitis (NASH), a major cause of liver cancer, were...