Chartist Looks For Balm From Gilead

05/07/2007 12:00 am EST


Dan Sullivan

Editor, The Chartist

Dan Sullivan, editor of The Chartist, says biotech firm Gilead Sciences has good products, good earnings, and a strong technical outlook, too.

Gilead Sciences (NASDAQ: GILD) discovers, develops, and markets anti-infective medications to treat patients who are suffering from life-threatening diseases. Since its 1992 initial public offering (IPO), it has emerged as one of the leading biotech firms, with a dominant position in the HIV drug market.

Headquartered in Foster City, California, [in the San Francisco Bay Area], Gilead has 2,500 employees with operations in North America, Europe, and Australia. In fiscal 2006 drug sales totaled $2.59 billion, compared with $1.81 billion in fiscal 2005, an increase of 43%. Its best selling drugs were Truvada, with sale of $1.19 billion, which was more than double its sales in 2005, and Viread with sales of $689.4 million. Both are used to treat HIV infection in adults.

There was no letdown in the first quarter as Gilead continued to show exceptional growth especially in its HIV drug franchise. Earnings jumped 55% to $407.4 million, or 85 cents a share, compared with 55 cents a share, a year ago. The results easily beat analysts’ estimates of 79 cents a share. Revenue grew 48% to $1.03 billion.

Gilead generated $490.5 million in operating cash flow for the quarter, which bumped its cash holdings to $1.86 billion. The firm also raised its research and development expenses to $130.1 million, from $88.4 million a year ago.

During the quarter, Truvada’s sales were $345.9 million, up 39%, from the first quarter of 2006. Analysts were watching to see if sales of its biggest seller would slow, due to last summer’s introduction of Atripla. The drug is the first-ever once-daily treatment for HIV patients. It is a combination of Gilead’s Truvada and Bristol-Myers Squibb’s Sustiva.

Many suspected that the new drug would eat into sales of Truvada. That wasn’t the case, however, as both drugs posted strong sales. In fact, the strong growth from both drugs further strengthened Gilead’s leadership in the HIV market.

Currently, the shares are trading [near] their all-time highs around 84. After being confined to a trading range from last October through January, the shares broke above resistance and powered sharply higher. From a January 29th intraday low at 62.43, it is up 35%. It trades well above its up-trending 50- and 200-day moving averages. It ranks #12 in our relative strength ratings.

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