Gilead Sciences Earnings Preview

Gilead investors will be watching for the effect, if any, that European cuts to HIV drug prices have on the company's third-quarter results.
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FOSTER CITY, Calif. (

TheStreet

) --The measure of

Gilead Sciences

(GILD) - Get Report

third-quarter earnings report Tuesday will hinge on whether or not U.S. sales growth and a turbo-charged share repurchase program can offset expected weakness in Europe due to government-mandated price cuts.

U.S. sales for Gilead's core HIV drug franchise are expected to meet or beat the Street's consensus expectations, according to prescription and sales data trends reported by IMS Health. Second-quarter HIV drug sales were hurt by lower purchases from state-run HIV drug treatment programs, but a new injection of federal money might have reversed that trend for the third quarter.

Less clear, however, is how Gilead's key HIV drugs like Atripla and Truvada are performing in Europe, where price cuts in countries like Germany and Spain may take a bite from Gilead's top line.

On average, Gilead is expected to post total revenue of $1.93 billion in the quarter, up 7% year over year, according to Thomson Reuters. Total products sales are expected to total $1.85 billion, including $657 million in Truvada sales and $737 million in sales from Atripla.

The consensus estimate calls for Gilead to earn 87 cents a share, excluding stock option expenses, in the third quarter, according to Thomson Reuters. An aggressive share buyback program, if greater than expected in the quarter, could provide Gilead with a significant earnings beat.

Outside the numbers, investors will be listening to Gilead's conference call Tuesday night for discussion of the company's nascent efforts at developing hepatitis C drugs, especially with an upcoming hepatitis C research meeting coming up at the end of the month. Management is also likely to be grilled about the company's overall business development strategy given concerns about looming patent expirations for its HIV drugs.

Gilead shares closed Friday at 37.73. The stock is up 18% since hitting a year-low at the end of August.

--Written by Adam Feuerstein in Boston.

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