Gilead's Q2 2024 Earnings: Beyond the Noise, Core Strengths and Pipeline Promise Outweigh Volatility

The pharmaceutical giant Gilead Sciences (GILD) delivered a mixed but fundamentally resilient Q2 2024 earnings report, with one-time expenses like in-process R&D (IPR&D) obscuring the company's underlying momentum. Investors should look beyond these temporary headwinds to focus on core business strength, pipeline progress, and strategic moves that position Gilead for sustained growth.

The IPR&D “Noise”: A Temporary Drag

Gilead's Q2 2024 IPR&D expenses totaled $38 million, a sharp drop from $236 million in Q2 2023. This decline reflects the absence of large one-time charges tied to recent acquisitions, such as the $3.9 billion purchase of CymaBay Therapeutics. However, a $2.43 billion IPR&D impairment charge in the first half of 2024 (largely non-recurring) further clouded GAAP results. Crucially, these impairments were excluded from non-GAAP metrics, which showed diluted EPS rising to $2.01, up from $1.34 in 2023.

Core Business: Resilience in HIV, Oncology, and Liver Therapies

Despite headwinds like declining Veklury (Remdesivir) sales (down 16% post-pandemic), Gilead's core franchises proved robust:

1. HIV Dominance:
2. Biktarvy sales rose 8% to $3.2 billion, driven by global demand and label expansions (e.g., for pregnant patients).
3. Descovy held steady at $485 million despite price pressures, signaling enduring demand for HIV prevention.

4. Five-year data from the International AIDS Conference reinforced Biktarvy's safety in aging populations and comorbidities.

5. Oncology Growth:

6. Trodelvy sales jumped 23% to $320 million, despite missing endpoints in two late-stage trials (TROPiCS-04 and EVOKE-01). While this poses near-term risks, its use in metastatic breast cancer and other indications remains strong.

7. Yescarta and Tecartus advanced in cell therapy markets, with real-world data highlighting their efficacy in lymphomas.

8. Liver Disease Surge:

9. Bulevirtide sales soared 17% to $832 million, benefiting from U.S. price hikes and expanded use in hepatitis D (HDV). Phase 2b data for its 10 mg formulation, combined with interferon, demonstrated potential for finite therapies in chronic HDV.
10. The FDA's August 2024 PDUFA date for seladelpar (acquired via CymaBay) looms large, with Phase 3 data showing it outperforms current PBC treatments.

Pipeline Milestones: The Future Is Bright

Gilead's pipeline is its crown jewel, with three transformative programs nearing commercialization:

1. Lenacapavir (HIV Prevention):

2. Phase 3 data showed 100% efficacy in cisgender women, outperforming Truvada. Its twice-yearly subcutaneous dosing could disrupt the $4 billion PrEP market.

3. Seladelpar (PBC):

4. With FDA approval expected in August, seladelpar could capture 50% of the PBC market within three years, generating $500 million+ annually.

5. Bictegravir + Lenacapavir (Combination Therapy):

6. Phase 2 data for this once-daily oral combo demonstrated 100% virologic suppression, positioning it as a first-line HIV treatment.

Risks on the Horizon

• Trodelvy's Trial Setbacks: While its commercial value remains intact, missed endpoints in urothelial and NSCLC cancers could limit label expansion.
• Generic Competition: Biktarvy's exclusivity is secure until 2030, but generic threats to older HIV drugs like Truvada (patent expires 2028) loom.
• Cash Burn: The CymaBay acquisition reduced cash reserves to $2.8 billion, though GILD's $3.60–$3.90 non-GAAP EPS guidance for 2024 underscores liquidity stability.

Investment Thesis: Focus on the Long Game

Gilead's Q2 results underscore a transitional quarter, where short-term volatility (driven by R&D impairments and Trodelvy's trial outcomes) overshadows long-term fundamentals. Investors should:

1. Look Through GAAP Metrics: Non-GAAP figures strip out one-time charges, revealing 5% revenue growth and a solid cash flow trajectory.
2. Bet on the Pipeline: Lenacapavir and seladelpar alone could add $1 billion+ to annual sales by 2026.
3. Monitor FDA Decisions: A “yes” for seladelpar in August 2024 could spark a 15–20% stock rally, while positive Phase 3 data for lenacapavir solidifies its blockbuster status.

Verdict: Hold for Long-Term Gains

Gilead's stock has underperformed peers YTD (-7%) due to near-term uncertainties. However, its $27.1–$27.5 billion 2024 revenue guidance and pipeline catalysts justify a buy or hold stance. The key inflection point is August's FDA decision on seladelpar—if approved, GILD could reaccelerate to high-single-digit annual growth, rewarding patient investors.

In sum, Gilead's IPR&D noise is temporary. The company's core HIV/oncology dominance and pipeline breakthroughs make it a compelling play for those willing to look past the quarterly volatility.