Episode Details

Gilead Sciences, Inc. (GILD) Q2 2026 — Q2 2026, quarter ended June 30, 2026. Revenue $7,803M, +10%, vs ~$7.37-7.40B consensus - a ~$400M beat. GAAP diluted EPS -$8.45 (net loss $10,496M); non-GAAP -$6.75 vs ~-$7.26 expected. Both driven by $11,183M of acquired IPR&D worth -$9.08/share. Add it back and the quarter earned $2.33 vs $2.01. HIV $5,693M +12%; Yeztugo $232M vs $15M. GILD closed $135.25 on Aug 4. Gilead beat on revenue by about $400 million, raised guidance, and reported a $10.5 billion net loss. All three are true because of one line: $11,183M of acquired in-process R&D expensed the day the Arcellx, Tubulis and Ouro deals closed, worth $9.08 a share. Add it back and the quarter earned $2.33 against $2.01. The catch is the bar it beat: full-year non-GAAP guidance went from +$8.65 in February to -$0.85 in May to -$0.48 on Tuesday. THE CALL: SELL (3/5, A VALUATION CALL, NOT A BUSINESS CALL) — base-case value ~$105.0 vs ~$135.25 today. KEY METRICS: - CALL: SELL 3/5, fair value ~$114 vs the $135.25 close (-16%). A 12-year DCF that crosses April 1 2036, when Gilead's settlements with Lupin, Cipla and Laurus let US generic Biktarvy in. We start from REPORTED free cash flow ($10,305M 2024, $9,456M 2025, $5,859M H1-26; we model $12.0B for 2026) then charge $1.5B/yr for buying the pipeline. At 7/8/9%: bear $71/$61/$53, base $124/$105/$90, bull $201/$165/$139; weighted 30/50/20 = ~$114. Six of the nine cells sit below the close. The Street: Buy, $158.67. - THE PRINT. Revenue $7,803M, +10%, vs ~$7.37-7.40B expected - a ~$400M beat. Product sales $7,627M (+8%), ex-Veklury $7,604M (+10%). GAAP operating loss $10,394M, net loss $10,496M, EPS -$8.45 vs +$1.56. Non-GAAP EPS -$6.75 vs +$2.01. Acquired IPR&D $11,183M (Arcellx $7.0B, Tubulis $3.1B, Ouro $1.0B net of Lakefront), plus a separate $1,750M impairment on Immunomedics assets. Check it: $9.08 x 1,243M shares = $11,286M. Add it back and the quarter earned $2.33 vs $2.01, +16%. - THE BAR FELL $9.50. Full-year non-GAAP EPS guidance, from the reconciliation table: Feb 10, $8.45 to $8.85. May 7, -$1.05 to -$0.65. Aug 4, -$0.65 to -$0.30. The midpoint dropped $9.50 in three months on deal charges alone, then rose $0.37 on Tuesday. Two published consensus figures sat $0.19 apart (-$7.26 and -$7.07) because every analyst had to guess the same charge - so the beat is $0.51 or $0.32 depending on whose arithmetic. The ~$400M revenue beat is the unarguable part. - THE RAISE, MEASURED. Ex-Veklury guidance went from $29,400-29,800M to $29,800-30,100M (+$400M), but Veklury was cut from ~$600M to ~$300M, so TOTAL product sales guidance moved only from $30.0-30.4B to $30.1-30.4B - the top end did not move. H1 ex-Veklury was $14,406M, so the guide implies $15,394-15,694M in H2 vs $14,759M last year: 4-6% growth against the 9% just delivered. Underlying H2 operating profit implies ~$7.16B vs $7.72B, -7%. Underlying FY EPS $8.43-$8.78 vs $8.97 in 2025. - WHAT THE DEALS COST, AND APRIL 2036. Cash fell from $10,605M to $3,179M in six months; equity from $22,618M to $11,744M. Uses: $11.3B acquisitions, $2.8B debt repaid, $2.1B dividends, $774M buybacks, funded by $4.1B of new debt and $6.1B of operating cash flow. Q2 free cash flow was $3,432M vs $720M - the operating business is fine. But Biktarvy did $14,334M in 2025, half of $28,915M of product sales, and Yeztugo is at $232M a quarter. HIV grew on 'higher average realized price and demand' - in that order, into an MFN pricing agreement. What to watch: Changes our mind UP: two years of acquired IPR&D under $1.5B while ex-Veklury sales compound above 6%, or Yeztugo clearing a $2B annual run-rate. Confirms the bear: another multi-billion deal expensed inside twelve months, or a concession on US HIV pricing under the most-favoured-nation agreement. We would buy at $105-$122. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.