Analyst Conference Summary
|Revenues by product (millions):|
25% y/y increase
Cost of goods sold was $321.5 million. Research and development expense $201.9 million. Selling general and administrative expense $193.7 million. Income from operations $711.1 million. Interest and other income $18.5 million. Income tax provision $161.5 million.
77.4% non-GAAP product gross margin, down due to higher proportion of Atripla sales, which has lower margins because one component requires royalties to another company. 52.5% non-GAAP operating margin.
In September the U.S. Dept. of Health issued revised guidelines that Truvada and Atripla are the backbone of choice for new HIV patients. This should lead to continued growth in the HIV franchise.
Viread for Hepatitis B is for sale and is showing promising results. Sales are going well in Great Britain as well as in the U.S. With Hepsera, Gilead now has 48% of market share.
26.5% effective 2008 tax rate; 22.1% Q4 2008 effective tax rate.
Details of market share gains for HIV drugs, versus competitors, were given.
R&D pipeline is stronger than ever. Decided to discontinue development of GS 9131, which was in Phase I/II to focus on integrase program. Elvitegravir program was speeded up and broadened with FDA approval.
What do you have to show in the 9350 Phase II to go to Phase III in Elvitegravir (quad) program? We have to finish a smaller study, call it phase II or III, with 50 to 100 patients, to establish safety over about 12 weeks. It also takes a few months to analyze data. Then we can go on to the larger Phase III study. We already have a fair amount of data on Elvitegravir, and have a separate Phase III study already underway.
Guidance for total product sales is less than street consensus. Why? In U.S. there is healthy underlying growth in prescriptions, but still slowed in Q4. It appears inventory was decreased in chain. This may be due to macroeconomics. We are seeing a change of behavior both at wholesale and retail level, which creates uncertainty. There may also be foreign exchange volatility.
For Q1 we will have 2 less shipping days than normal.
Magnitude of foreign exhange effects? Range in revenue, even with hedging, could be $50 to $100 million if there were a 10% change in rates. We hedge 18 months out, and there is an offsetting natural hedge. You have to look at it on an annual basis.
Are the new HIV guidelines incorporated into the guidance? We believe we will continue to have very healthy growth of our HIV franchise, including taking market share in Europe. 2009 will also be the first year of sales of Atripla in Europe in many countries. Also, we are hoping France will approve Atripla. Pricing could be an issue too.
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Copyright 2009 William P. Meyers