Updated from 9:40 a.m. EDTGilead Sciences' ( GILD) first-quarter results proved that all the pre-earnings jitters that pummeled the company's share price were wrong and a big waste of time. On Tuesday night, the Foster City, Calif.-based biotech firm reported adjusted first-quarter earnings growth of 24% on a 22% surge in revenue, topping consensus estimates on both marks. Most important, Gilead's HIV drug sales were stronger than expected in the quarter, also besting analyst estimates. It seems as if all the dire predictions about the recession and inventory de-stocking causing a calamitous revenue and profit shortfall at Gilead were for naught. On its conference call, Gilead management said demand for its key HIV drugs Atripla and Truvada remained strong. Inventory levels, while dipping slightly in the quarter, are still well within normal range, and the company is seeing no evidence that its patients are having any added trouble paying for their prescriptions. Plain and simple, Gilead beat the quarter on real sales growth -- no big one-time drug shipments, no gimmicks, no inventory buy-ins, and in fact, slightly fewer shipping days this quarter over last. So let Celgene ( CELG) blame the economy for a first-quarter earnings miss, and let Abbott Labs ( ABT) explain why sales of its key HIV drug came up short last week. Gilead is doing just fine, thank you very much. Whether this prods investors to buy back all the Gilead stock they've been selling in the past couple of weeks remains to be seen. Gilead shares have slumped more than $4 to below $44 as general investors' concerns about biotech earnings turned to near panic once Celgene warned and conflicting data surfaced regarding Gilead's HIV drug prescriptions.
Some recovery was evident Wednesday morning, with Gilead shares up 7.7% to $47.10 in recent trading. Gilead's quarter was strong, especially given the circumstances, but it wasn't perfect. While the acquisition of CV Therapeutics only closed last week, Gilead did disclose Ranexa sales of $26 million in the first quarter, down more than 17% sequentially and well below analyst estimates. Gilead offered no explanation for why CV Therapeutics' chronic angina drug came up short, so this is a concern that will likely linger until next quarter. At this point, Ranexa sales are immaterial to Gilead's overall revenue, but CV Therapeutics was bought for more than $1 billion on the belief that Ranexa could grow into a significant profit contributor. Gilead also didn't raise its 2009 net product revenue guidance of $5.9 billion to $6 billion, despite a run rate pointing to sales clearly beyond the top of that range. Updated guidance, including higher revenue projections, is more likely to come on the second-quarter conference call when Gilead will talk more about the integration of CV Therapeutics. Gilead trades at about 16 times 2009 earnings estimates, slightly higher than the biotech group average. But then, as the company proved Tuesday, above-average growth on the top and bottom line and an HIV drug franchise that remains highly defensible against macro-economic troubles makes Gilead a core biotech holding.