As the competition is growing intense in Europe between Gilead Sciences (GILD, Financial) and AbbVie Inc. (ABBV, Financial) with respect to their respective hepatitis C drugs which are currently in a price war, analysts across the globe are speculating whether the former will continue to post improvement in the top and bottom line in the fourth quarter and remain ahead of such rivals. Gilead Sciences is expected to announce its full-year and fourth-quarter results on February 2, and meanwhile there are analysts’ opining on the strong likelihood of its hepatitis C drug sales beating market expectations in the fourth quarter. Let’s find out what the crux of the story is and what the expectations are from the analysts’ corner on the fourth quarter results of Gilead Sciences.
Keeping pace with rivals
The competition between Gilead Sciences Inc. and AbbVie Inc. gained momentum after Express Scripts Holding Company (ESRX, Financial) announced late last year that it was dropping the former’s hepatitis C drugs off its formulary in favor of exclusively covering the latter’s newly approved hepatitis C drug Viekira Pak. Recently to maintain the pricing battle with AbbVie, Gilead Sciences has won over the confidence of the third-largest health insurer in the U.S., Aetna Inc. (AET, Financial), to grant preferred status to Gilead’s hepatitis C drugs Sovaldi and Harvoni over AbbVie’s newly launched Viekira Pak. Last Friday, Aetna Inc. updated its coverage policy mentioning that the Gilead hepatitis C drugs discounted price was competitive with other recently announced agreements for that class of therapy.
And the health insurer has given clarity that it would prefer Gilead’s hepatitis C drugs over AbbVie’s newly launched drug, though details of the discount negotiations were not revealed. Such agreements with leading insurers have led analysts to believe that the company would continue to earn returns from the hepatitis C treatments.
Creating new milestones
Troubled by the strategy taken by immediate rival AbbVie to promote its hepatitis C drug, Gilead Sciences went ahead and signed several deals with CVS Health Corp. (CVS, Financial), Anthem Inc.(ANTM, Financial) and Humana Inc. (HUM, Financial) for exclusive coverage of its drugs in exchange of high discounts which could be as high as 30% as estimated by analysts.
This aided in creating a milestone and in gaining back lost market share in the lucrative hepatitis C treatment market which has affected over three million people in U.S. alone. Since, AbbVie’s drug is priced lower to those of Gilead; the latter has entered into deals with major pharmacy-benefits management companies to retain its dominance in the market.
Analysts optimistic on Gilead’s future
Evercore ISI analyst Mark Schoenebaum stated on January 20 that as Gilead has adopted the best strategies to compete with AbbVie, there is a possibility of the drug-maker’s sales for the hepatitis C drugs outpacing the market expectations, irrespective of the raging price war with AbbVie. As per his forecast, the company’s hepatitis C drug sales could amount to $3.3 billion, once net inventory buildup and capture rate of 78%-79% is pieced into the model.
Jefferies, on the other hand are expecting the hepatitis C drug sales to be around $4.143 billion for the fourth fiscal quarter. There are several other analysts who are also speculating around the sales in the hepatitis C affected markets and thus averaging all such opinions, the hepatitis C drug sales is expected to be nearly $3.265 billion from sales of Harvoni and Sovaldi in the final quarter of the fiscal year 2014.
Analysts are further expecting the total revenue to be close to $6.69 billion for the fourth quarter, which would be an impressive 114.7% over the previous year’s similar quarter. Earnings are estimated to grow by a whopping 318.3% to $2.18 per share. Coincidently, Gilead has been on the dream run for the past eight quarters when it has beaten analyst estimates on earnings in five out of eight quarters and on sales in seven out of eight quarters.
A lot to introspect going forward
The company is expected to provide further insight on the approval for Harvoni and Sovaldi in Japan during the fourth quarter earnings call, as it suggests introducing it in Japan by the first half of 2015. The pharmaceutical major will possibly touch upon the commercial developmental plans and the product pipeline for 2015, while discussing on the promising numbers of 2014 which are yet to be revealed on February 2 from the company headquarters. Let’s stay tuned to find out how the company is building its moves to continue its dream run in 2015 and whether the fourth quarter results are able to exceed analysts’ expectations.
