Gilead earnings on deck: Can pipeline wins offset acquisition costs?

Gilead Sciences Inc. is set to release its third-quarter earnings report on Thursday, with investors closely watching to see if the company's aggressive pipeline expansion can offset the near-term profitability challenges it faces. Analysts are projecting earnings per share of $2.17 on revenue of $7.79 billion, marking a slight recovery from the previous quarter's loss but a year-over-year decline as the biopharmaceutical company pours resources into diversifying its portfolio beyond HIV treatments.

Gilead experienced a $6.75 loss per share in the second quarter, primarily due to $9.08 in acquired in-process R&D and tax expenses from recent acquisitions. Revenue for the quarter stood at $7.8 billion, aligning closely with expectations. Analysts maintain a Buy rating on Gilead, with 28 covering the stock, but the consensus price target of $160.19 suggests minimal upside from the current share price of $159.20.

Earnings per share estimates have gradually increased over the past 60 days but dipped slightly in the last week, with several analysts raising price targets in October, including Jefferies to $185 and JPMorgan to $170 from $160. HIV remains the cornerstone of Gilead's growth strategy, with product sales excluding Veklury up 10% year-over-year in the second quarter, driven by a 12% increase in HIV sales and expanding pre-exposure prophylaxis (PrEP) business.

Investors will be particularly interested in the performance of Biktarvy, which generated $3.8 billion in the previous quarter, and the adoption of Yeztugo, Gilead's recently launched HIV prevention therapy. Apart from HIV, Gilead's inflammatory bowel disease (IBD) strategy is gaining traction. The company recently presented Phase 2 SWIFT data showing emvistegrast achieved 31% clinical remission compared to 8% for placebo in ulcerative colitis patients.

Gilead has also announced it will acquire oral IL-23R inhibitor HCXT-2001 from PepStar for $1.275 billion, with the transaction expected to close in the fourth quarter. Analysts view the combination of emvistegrast and HCXT-2001 as potentially offering superior outcomes for IBD patients with prior advanced therapy exposure. Oncology diversification is also a focus for Gilead, with management highlighting Trodelvy's success following its first-line metastatic triple-negative breast cancer indication expansion and the promising sales trajectory of Livdelzi in liver disease.

In the second quarter, product sales excluding Veklury reached $7.6 billion, surpassing expectations and prompting management to raise full-year guidance. However, the real question remains whether Gilead can prove that its core commercial business generates sufficient cash flow to fund its ambitious acquisition spree, which includes deals for Arcellx, Tubulis, and Ouro Medicines totaling over $15 billion, while transitioning from an HIV-dependent company to a diversified biopharmaceutical entity with multiple growth engines.

The results will provide crucial insights into whether Gilead's pipeline diversification bet can deliver sustained growth or if near-term earnings pressure from deal-making will overshadow its long-term strategic value.