Expensive Buy Hurts Gilead Profits
Acquisitions turned out to be costly for Gilead Sciences (NASDAQ:GILD) in the first quarter as the company reported a 32 percent drop in earnings. The biopharmaceutical company said profits fell to $442 million, or 57 cents a share, from $651 million, or 80 cents a share, in the year-ago period. This includes 25 cents a share in costs related to acquiring drug developer Pharmasset.
Adjusted profit after expenses came to 91 cents a share, less than consensus Wall Street estimates of 93 cents a share. Revenue beat estimates, rising to $2.28 billion from $1.93 billion. Operating margins dropped to 35.1 percent from 46.8 percent.
The $11 billion purchase of Pharmasset was costly, but is expected to help the company grab a bigger share of the popular hepatitis C drug market. However, Gilead did get a setback on one of the drugs it bought along with Pharmasset, GS-7977, which had an unfavorable result in a February clinical trial.
Product sales, the company’s main revenue source, rose 19 percent, with sales of antiviral products going up. Royalties, including those from Roche for Tamiflu, also grew 19 percent.
The stock is up 29 percent this year through the close on Thursday, but fell 1.4 percent to $52 shortly after the report in after-hours trading.