Analyst Note| Karen Andersen, CFA |
Gilead's product sales fell 10% year over year in the second quarter due to generic pressure on Letairis and Ranexa, a pandemic-related decline in patients seeking hepatitis C treatment and HIV pre-exposure prophylaxis, and the reversal of patient stockpiling that benefited first-quarter results. Management raised its product sales guidance for 2020 by a range of $1.2-$2.8 billion after incorporating coronavirus headwinds (less than $500 million impact in the first half) and highly uncertain sales assumptions for remdesivir. This guidance fits with our assumption of $2 billion in remdesivir sales in 2020, and we're maintaining our $85 per share fair value estimate for the firm. Gilead continues to build its oncology pipeline with small deals to supplement the larger Forty-Seven acquisition (which closed in the second quarter), and we think this investment will eventually offer support to the firm's wide moat, which currently rests on its dominant position in infectious diseases including HIV, hepatitis C, and now COVID-19.