http://www.bidnessetc.com/65955-gilead- ... oss-merck/" onclick="window.open(this.href);return false;
Zakken ze onder $87 dan koop ik bij.
Wel kort door de bocht vind ik de stelling dat Gilead nog 96% van zijn markt voor HCV-patiënten kan aanboren. Van die 185 miljoen mensen, wonen er 80% in ontwikkelingslanden. Hoewel Gilead zijn medicijnen ginder goedkoper aanbiedt, is het een utopie te denken dat men van die 80% er ooit meer dan de helft zal kunnen bereiken. Het zal al een wonder zijn, zelfs met alle Obamacares bij elkaar, als men alle Amerikanen met HCV als klant zou kunnen krijgen...
Alleszins zit er nog veel potentieel in Gilead en in de pijplijn zitten talrijke interessante producten, zoals een mogelijke kuur tegen HIV. Maar dat is interessant voor de toekomst, in het heden zou ik ook zeggen: kopen.
I just did some pre-earnings analysis this morning and I'm going to use your article to unload this very long comment(enter at your own risk) detailing it.
OK, earnings are on Apr 28, 2 weeks + Thursday, so it's time for a little preview. I'm not putting myself forward as an expert, so do your own due diligence as these are my opinions and self collated data that may be in error. I made a long comment analyzing Q4 earnings and much of what I said is still relevant:
http://seekingalpha.co.." onclick="window.open(this.href);return false;.
OK, first let's discuss the various variables that are going into earnings.
There are several variables that make any earnings predictions somewhat speculative, including the
1. share repurchase plans
2. Various HCV revenue streams, including, US private, US VA, US other government, Europe, Japan, Rest of world(ROW), HIV revenues, and other revenues.
5. Expenses, acquisitions charges, other charges (including patent disputed royalties).
1) SHARE REPURCHASE PROGRAM
A significant amount of stock was retired during Q1 especially with the accelerated buy back. The full impact won't be felt until following quarters as the earnings will be distributed over the weighted average number of shares, not the final share count. I've discussed the share repurchase in detail(listing all the purchases of the last few years) in previous comments which I will link here:
http://seekingalpha.co.." onclick="window.open(this.href);return false;.
With the share price currently over $97, the buy back over the last couple of years has been pretty much a push (with the accelerated buy back(ASR) in the $80's balancing out the $100+ buys in 2015). I'm talking push in terms of capital gains on the average price of the transactions as there has been a lot spent and lot of stock retired. If GILD trades above $100 in the future, these recent (last 2 years) repurchases will have had a positive(and free) capital gain effect. In fact I believe for the share repurchase of 2014-current, Gilead will in effect have capital gains ~250M/each dollar above the stock price goes above $100 which could support the idea that Gilead's best investment will have been to purchase itself.
In fact just this last quarter just the ASR(5B) retired over 4% of stock and that isn't counting the ongoing on market purchases. This dwarfs any dilution due to stock based compensation (Gilead estimated $.23 or ~.25% at current stock price impact for 2016), so don't worry about that. I'm expecting at least a .10/share gain in earnings this quarter and more in later quarters over Q4 due to the buy back. I think we can look forward to dividend raises that at a minimum increase as much as the percentage decrease of shares due to repurchase (that will keep a constant total dividend payout).
Two other items on the share repurchase for those that don't like it: a) since it doesn't change cash and cash flow position enough to disrupt m&a&partnership activity, who cares? b) At PE's below 8, it is probable that it will have a long term free capital gain effect, and at the same time it reduces the total dividend payout (less shares).
2) REVENUE STREAMS
a)US private. Total Q1 private scripts are evidently tracking about 6% below Q4 private payor scripts. Market share has declined from ~$95% to about $92% of new scripts. The average price may have been discounted more plus there are probably more 8 week (Harvoni) courses than 12 week courses (however that is already reflected in total scripts). Just making a WAG, I would say private payor (USA)revenue for Q1 would be down about 10% from Q4.
b)VA and other government payors. Additional VA income may largely makeup for the loss on the private side as the VA was out of money in Q4 and has gotten a new budget (1.5B for 2016) for Q1. I believe other government payors budgets may have increased as well, and that they will spend their budgets relatively quickly, so we may see a significant boost in other government revenues in Q1 as well. This will continue an ongoing slow shift of the percentages of private to government payors in the total scripts. IMS and Symphony include only private payor scripts so we don't see data on this ahead of time.
c) Europe. I believe we will see an increase in revenues in Europe. While there will be continued increases in discounting, there is still a big backlog of HCV infected, and Europe is in effect budget constrained. So, revenue will be dependent in the near future on total European budget allocations to fight the disease. I expect that total budget to increase as market penetration increases (more countries) and the European states recognize the efficacy and future cost savings of HCV cures, and that with further discounting they can treat sizable volumes of patients that have been waiting for some time. I think we can expect >1B in revenues from Europe (from $846M in Q4).
d) Japan. The first full quarter of Harvoni/Sovaldi in Japan (Q4) was fabulous with 1.4B in revenues. Japan mandated a 31% price decrease in Gilead's HCV drugs, but that was not effective until Q2(beginning of Japanese fiscal year). Still(speculating), there may be some patients delayed in Q1 and treated in Q2 in order to take advantage of new lower pricing. Anyway the question becomes will the Japanese budget be stable and make up for discounting with increased volumes and will Gilead maintain dominant market share there? I'm going to speculate that there were some exceptional expenditures to treat warehoused (and very sick) patients in Q4, that may have caused a temporary higher use of moneys and that the overall budget in Japan will be somewhat less than Q4 indicated. I think they will treat relatively similar volumes going forward, but with the discounted prices (31%) do the same for around 1B/quarter. I'll guess at 1.2B in Q1 and 1B/Q going forward.
e)ROW The rest of world accounted for a very small percentage(280M) of total HCV sales in Q4 and I don't expect that to change much in Q1. I think in the next couple of years, this could grow substantially with the release of new pan-genotypical drug(SOF/VEL) and the subsequent addition of such players as China.
(a-e) summary(HCV sales). There were a total of 4.9B in HCV sales in Q4. Adding the above all up, I think Q1 HCV sales will be flattish
US 2.5B,Japan 1.2B, Europe 1B, ROW 300M gets us to 5B a 2% gain over Q4 (but not any kind of collapse of revenues that the bears keep expecting).
f) HIV and other revenues.
HIV revenues which used to be the cash cow that floated Gilead's boat have been largely overshadowed by the record breaking HCV revenues. However, it continues to be an extremely significant and important continuing and growing revenue stream. In Q4, I believe HIV accounted for about 3B in product sales up from about 2.9B in Q3. I think the trend will continue up as the transition to next generation (TAF based) HIV medications continues in this growing market. Let's say 3.1B in HIV sales and another .5B in other product sales
OK when I add it all up I get about 8.6B in revenues in Q1 compared to 8.4B in Q4. If I assume a relatively flattish year going forward, I would get 34.4B for 2016 compared to Gilead guidance of 30-31B. I really don't think the full year will be less than 2015 of 32.1B and most probably >33B (conservatively). That would mean another year of real revenue growth and really no end in sight for continuing high cash flows. I believe earnings will be relatively mostly flat with the exception of the share repurchase impact which should at a minimum stop any earnings erosion. I had been predicting >$3.50 earnings for Q1, but I will go with my favorite predictor(the high analyst at the yahoo GILD financial board) and go with $3.44 and I will stick with >$14 for 2016 EPS.
3) DISCOUNTING and COMPETITION
Merck's Zepatier arrived with much fanfare and caused a downward spike in GILD. The truth is that it has had less immediate impact than ABBV's Viekira Pack did when it debuted.
Here is note from Barron's Blog and a Leerink quote in Levinson's column on 3/16/16
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As far as discounting, no doubt there has been some further discounting and some mandated pay decreases (Japan beginning Q2). Because of all the discounting, the threat by Zepatier's entry price of 54K didn't and won't have the impact that some feared. Remember Harvoni's 8 week course already reduces treatment costs by 1/3(from a regular 12 week course) for those that qualify. So the blended price with volume discounts and other reductions in cost due to efficacy, and ease of treatment mean that Gilead did not have to adjust price due to Zepatier as it is already more than competitive. This is why the headline news hurt much worse than the reality of Merck's competitive offering and the stock price has recovered from the headline downward spike.
I don't think the discounting affects Europe or Japan all that much. I believe these markets are pretty much budget constrained and they will spend what they decide to allocate. So, volume increases will in general make up for discounting. I do think Japan will want to spend less than Q4 (1.4B), so I do see some reduction there, but I see overall increases in European budgets balancing the Japanese reduction.
4) Expenses and other items
OK, there was a jury decision ruling against Gilead in a patent scuffle and the subsequent 200M award. There is also a pending forward royalty judgement to be rendered (would be 4% of US sales if it was commensurate with the jury award for past damages). Evidently, with effects would deduct about $.59(Barron's blog) from Gilead's NPV. There will be ongoing appeals and I give Gilead a good chance of ultimately prevailing or at least reducing damages to a very minimal amount. I don't believe this specific threat is material to the stock price going forward other than by a token amount. I'm not an accountant so I don't know how the 200M in damages (won't be paid until appeals process finishes I assume) will be accounted by I expect there might be some special charge to be put in place. 200M is ~$.15/share
There are other items, like m&a&partnership activity, the ending of Zydelig trials, growth in r&d spending, growth in administration due to expanding geographical markets, option grants, etc. I suggest anyone interested in details on these items review Gilead's Q4 earnings report. The previous guidance was for 2016 EPS impact of $1.10-$1.16 for acquistion related ($.88-$.92) and stock based ($.22-$.24) expense. The nimbus acquisition will probably increase this slightly. Ultimately, I don't think there will any major changes, but probably incrementally higher costs for R&D and SG&A continuing the ramp up to normalize R&D to new cash flows and to reflect expenses for geographically expanding markets and new products. While the Zydelig stuff is a bummer in that optimistic scenarios for that drug have been crushed, it accounts for an extremely small percentage of revenues, so it will have no impact on earnings. While the ending of the Zydelig trials will save money, I would expect the administrative cleanup to cost money. I'm sure Gilead is looking at many alternatives to go forward both internally and with external help in Oncology and there will be significant budgets for that activity.
Zotte analyses die je leest. Sinds 2014 is de omzet geëxplodeerd, maar we zitten nog altijd op dezelfde koers als toen. Terecht maakt men de opmerking dat deze omzet niet houdbaar is, de reden dat het aandeel maar niet van tram 8 wegraakt, maar in 2014 was het aandeel nog "niet overgewaardeerd" en met dezelfde koers en veel, veel, véél hogere winst, FCF en omzet is dat in 2016 wel als je sommigen moet geloven. "Value trap".
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