The growth rate of the core business is the highest in more than ten years! Gilead (GILD.US) Q3 “Good News and Worries”: Annual sales guidelines were raised, but Biktarvy will face 38% price reduction pressure on US health insurance

The Zhitong Finance App learned that US biopharmaceutical giant Gilead Sciences (GILD.US) released its financial report for the third quarter of 2026 on October 29 (Thursday) local time. Driven by double-digit growth in its flagship HIV drug pipeline, the company's product sales for the quarter increased 13% year over year to 8.3 billion US dollars, exceeding market expectations; “basic business” sales after excluding the COVID-19 drug Veklury (remdesivir) increased 16% year over year to 8.2 billion US dollars, the fastest year-on-year basic business growth rate in more than 10 years. Based on strong performance, the company once again raised its annual sales guidelines.

The performance completely beat Wall Street expectations, and the stock price continued to rise after the market

According to financial data, Gilead's adjusted earnings per share (non-GAAP EPS) for the third quarter was $2.55, which greatly exceeded analysts' average expectations of $2.19; revenue of $8.3 billion was also higher than the forecast of $7.8 billion. After the financial report was released, the company's stock price rose 4% during the regular trading session, then rose 2.2% to 169.25 US dollars after the market, with a cumulative increase of 36% during the year.

According to US GAAP, the company's net profit for the third quarter was US$2.43 billion (US$1.94 per share), down from US$3.05 billion (US$2.43 per share) in the same period last year. The decline in profit was mainly due to net loss of current equity investment (net income for the same period of the previous year), increased operating expenses and income tax expenses, and failure to recover concession income from an intellectual property sale in the same period last year.

In terms of cash flow, the company's operating cash flow reached US$5 billion in the third quarter; as of September 30, the balance of cash and marketable debt securities was US$6.4 billion, down from US$10.6 billion at the end of 2025, mainly due to the cumulative expenditure of US$11.3 billion during the year on mergers and acquisitions, US$2.8 billion in debt repayment, US$3.1 billion in dividends and US$1.1 billion in stock repurchases.

The HIV business carried the flag, and tumors and liver diseases blossomed more and more

In the third quarter, sales of HIV products, which account for the majority of the company's revenue, increased 18% year over year to US$6.2 billion, mainly driven by average price increases, increased demand for HIV prevention drugs, and favorable inventory dynamics. Among them, sales of HIV prevention drugs nearly doubled. Sales of the ace compound drug Biktarvy (Biktarvy) increased 10% year over year to US$4.1 billion, higher than market expectations of US$3.86 billion.

The non-HIV business also performed well: sales of the anti-cancer drug Trodelvy (gosastuzumab) were driven by strong demand, surging 42% year over year to US$506 million; combined liver disease sales increased 13% to US$927 million, with sales of the new liver disease drug Livdelzi increasing from US$105 million in the same period last year to US$203 million.

In terms of drag down, the cell therapy business was affected by continued competition, with sales falling 18% year over year to US$355 million; sales of the COVID-19 treatment drug Veklury shrank significantly due to a decrease in the number of hospitalizations.

Worry: Medicare price cuts are on top of Biktarvy

During the earnings call, Chief Financial Officer Andrew Dickinson revealed that according to the results of the third round of annual drug price negotiations under the “Inflation Reduction Act” (IRA), the US Medicare and Medicaid Services (CMS) will reduce the price of federal Medicare (Medicare) payments to Biktarvy for people aged 65 and over by 38% to the “highest fair price” of 2,600 US dollars every 30 days starting January 1, 2028. This is expected to reduce Gilead's Biktarvy sales by about $1.5 billion in 2028, but the company still expects the overall revenue of the HIV business to increase compared to 2027 at that time.

Brian Abrahams, an analyst at RBC Capital Markets, pointed out in the research report that Gilead's performance in the current quarter “met or even exceeded rising market expectations,” but he also warned that after the sharp rise in stock prices, “considering potential brand-name drugs/generic drug competition and the impact of IRA pricing, the market may begin to question the long-term sustainability of its HIV pipeline revenue growth.”

The full-year guidance was raised, but loss expectations increased due to M&A expenses

Based on strong performance, Gilead raised its product sales guidance for the full year 2026 to US$31 billion to US$31.3 billion (previously US$30.1 billion to US$30.4 billion), which is also part of the cumulative increase of US$1.6 billion since the beginning of the year. Chairman and CEO Daniel O'Day said, “Gilead handed over an impressive third-quarter report card and achieved the strongest year-on-year basic business growth in more than 10 years... The company has several products under development and potential new launches in the HIV and oncology fields, and has also made significant progress in the field of inflammation. We are confident in the business growth and impact on patients.”

However, due to a series of mergers and acquisitions during the year (including the acquisition of Arcellx, Tubulis, Ouro Medicines, etc.) of approximately US$12.4 billion in transaction costs, the company extended its non-GAAP loss forecast per share for the full year 2026 to $0.85 to 1.20 US dollars (previously a loss of 0.30 to 0.65 US dollars).