Baird: Gilead Set For Q1 EPS Miss, But Hep C Trends Still Good Long Term

The first quarter earnings of Gilead Sciences, Inc. (NASDAQ: GILD) may miss the Street view, but promising Hep C Rx trends drive a positive outlook, according to a note from Baird.

Analyst Brian Skorney said, "Our estimate for pro forma fully diluted EPS is $2.92 versus consensus at $3.12. We think this is largely due to differences in Hep C estimates but believe strong HIV sales and a recent uptick in U.S. Hep C Rx trends will maintain the stock's recent strength."

Skorney, who has an Outperform rating and $135 target price on GILD shares, noted, "We expect Hep C sales in the U.S. to be roughly flat quarter-over-quarter (~$2.32 billion vs. 2.37 billion in 4Q15), recent trends in scripts have shown promise for an uptick in sales in 2Q."

He continued, "In March, new prescriptions popped up to levels not seen since last spring. Further, the launch of Merck & Co., Inc. (NYSE: MRK)'s Zepatier, has been uninspiring, diminishing competitive concerns."

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"If anything, this quarter's Hep C scripts are indicative of Gilead's continued stronghold in Hep C, and leveling off of the Hep C market in the U.S. In addition, U.S. Hep C could be bolstered by the renewed VA budget this quarter," he added.

The analyst estimates total Hep C sales in Europe of $1.0 billion versus $846 million last quarter, driven by "improved access and reimbursement in key countries, such as the UK in late 2015."

In addition, Skorney expects strong performance from HIV-1 treatment Genvoya.

"Script data thus far, has implied that Genvoya's launch is set to significantly outpace that of Stribild. We are projecting sales of $90 million versus consensus estimates of $70 million for the drug's first full quarter on the market," the analyst added.

Shares of Gilead Sciences were recently seen up 0.27 percent to $96.09. They have dropped 5 percent this year.