Glad Tidings for Gilead

Shares climbed 11% Thursday after the pharma outfit posted a sharp quarterly sales increase

Foster City (Calif.)-based biotech Gilead Sciences (GILD) enjoyed an 11% pop in its stock price Feb. 1 after the company reported an unexpectedly strong fourth quarter. It closed trading at $71.53. Analysts also turned bullish on the stock as they see the prospect for further growth.

Driving the company's revenues is a series of HIV/AIDS drugs. The newest addition is Atripla, a pill containing three separate medications, that Gilead released in the U.S. in July. The company also sells Truvada which contains two of those three medicines and Viread which contains one. Atripla adds the Bristol-Myers Squibb (BMY) drug Sustiva to the cocktail.

The combination of three medicines into one pill has enabled Gilead to continue to steal market stare from competing drugs, notably Glaxo's (GSK) Combivir, says Morningstar analyst Karen Andersen. Because the medication requires only one co-pay and is easier to administer "physicians are willing to switch," she says.

Though the company reported a net loss per share of $3.62 for the fourth quarter, the loss reflected $2.04 billion in charges for its recent acquisitions of Corus Pharma and Myogen. Excluding costs related to the acquisitions, net income for the quarter was 78 cents per share. The company reported earnings per share of 59 cents in the fourth quarter of 2005. Revenues climbed to $899.2 million from $609.3 million.

Gilead is projecting a further revenue bump to $3.4-$3.5 billion in 2007, a figure that does not include potential sales of Ambrisentan, a pulmonary arterial hypertension drug that could potentially go on sale in 2007.

Ambrisentan was the lead product candidate of Myogen, which Gilead acquired in the fall for $2.5 billion. Morningstar's Andersen, who in the wake of Gilead's strong quarter raised her fair value on the stock to $67 from $57, is cautiously optimistic about the merged company's pipeline. "It's not really a home run but concerns of overpaying for Myogen are fading."

In addition to filing a new drug application for Ambrisentan in late 2006, Gilead is developing Darusentan. A drug for treating resistant hypertension, it's also in advanced clinical trials.

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