Gilead Sciences (GILD) has reported a strong fourth quarter and full year results. The company reported quarterly revenues of $2.03 billion, up 42% compared to the year-ago period. Gilead’s earnings per share (EPS) came in at 87 cents. However, excluding non- recurring items, the company’s EPS of 90 cents surpassed the Zacks Consensus Estimate of 82 cents and the year-ago period’s 59 cents. For the full year of 2009, Gilead reported a 31% increase in revenues to $7.01 billion and EPS (excluding non recurring items) of $2.91 compared to $2.07.

Gilead’s robust growth was driven by strong product sales, especially the antiviral franchise. Product sales for 2009 increased 27% to $6.47 billion driven by growth in sales of antiviral products such as Atripla (growth of 51% to $2.4 billion), Truvada (growth of 18% to $2.5 billion) and Viread (growth of 7% to $667.5 million). Antiviral product sales for the full year grew to $5.84 billion, up 25%. Atripla, with quarterly sales of $697.8 million became the lead product surpassing $670.7 million of Truvada for the first time.

For 2009, Gilead’s royalty, contract and other revenues recorded a massive increase of 116% based on higher royalties from Roche related to Tamiflu sales. Royalties from Tamiflu during the year was $392.7 million compared to $155.5 million last year – a robust increase attributable to the worldwide preparations to combat swine flu.

On the operational front, operating margin during 2009 improved 160 basis points to 52% primarily on account of an increase in Tamiflu royalties. R&D expenses for the full year recorded an increase of 27% due to higher expenses to support various R&D activities and for reimbursement of R&D expenses related to Gilead’s collaboration with Tibotec Pharmaceuticals. In addition, SG&A expenses increased 14% due to higher headcount and expanding commercial activities.

Based on its robust performance, Gilead further strengthened its balance sheet. At the end of 2009, the company had $3.9 billion of cash, cash equivalents and marketable securities compared to $3.24 billion at the end of December 2008. The company repurchased $242 million worth of shares during the quarter fully exhausting its $3 billion share repurchase program.

During the third quarter, Gilead completed a restructuring plan to realign its cardiovascular operations with CV Therapeutics which cost the company approximately $52 million in 2009 with $19 million having been incurred during the fourth quarter. It expects to incur another $20 million in restructuring expenses through 2010.

In addition to posting a strong performance, Gilead provided guidance for 2010 net product revenues of $7.6 – $7.7 billion, an increase of 17% – 19% over 2009 product sales. We are Neutral on the stock.

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