Gilead Q1: Company Is Recession Resistant But Not Lawsuit Resistant

(MoneyWatch)  Yet another gravity-defying quarter at Gilead: Revenues were up 22 percent to $1.5 billion; net income was up 21 percent to $589 million. But same bad news lurks behind the numbers in the form of a shareholder lawsuit that was given the go-ahead by the US Supreme Court a few days ago. The Q1 2009 results came with yet another increase in productivity from its sales force and manufacturing arms. Although SG&A costs grew 5 percent, and cost of goods (chemicals, etc) grew 37 percent, the revenue increase was so massive that Gilead made more per dollar spent on both investments.

It's an astonishing set of numbers: Sales and income going up but operating costs in proportional decline. There's no other drug company that has achieved anything like that. For every dollar spent on sales reps, the company gets back $7.89 in revenue. A year ago it got $6.45.

But it's not all good news for Gilead. The Supreme court allowed a lawsuit to go ahead that claims stockholders were hurt back in 2003 when it emerged that the company had been warned by the FDA to stop selling Viread off-label and Viread sales declined. The suit claims a majority of the Viread sales at the time were off-label.

Since then, Gilead has gotten an on-label indication for the previously alleged off-label indication (hep B), and Viread sales are once again moving upward.

As BNET noted back in August, it will be a difficult case for Gilead to defend. The company must argue that it did not believe Viread should be used for hep B, even though it wanted the FDA to approve Viread for hep B -- and from now will be promoting Viread for hep B.

• See BNET's previous coverage of Gilead:
• Gilead Whistleblower Suit: A Bullet Dodged
• With New CV Drugs, Gilead Tests Its Commitment to Efficiency
• Gilead Executive Pay: Modest Raises for Outstanding Performance
• Gilead Deal Gives CV Therapeutics CEO $8.4 Million Payday Despite Lack of Profits
• Gilead's FDA Warning Letter Contains Lesson About the Internet
• Ranking of 20 Drug Companies' Sales Forces Shows Productivity Flat or Declining
• Gilead Earnings Sound Death Knell (Again) for Large Sales Forces
• It's Good News, Bad News for Gilead's HIV Pill