Not Hypergrowth, but Good Enough

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The new Gilead Sciences (NAS: GILD) isn't the hypergrowth story of the past decade when increasing sales by 30% or more was the norm, but the drugmaker hasn't completely lost its ability to post double-digit gains.

In the second quarter, the HIV specialist recorded a solid 11% increase in revenue. Atripla, which is a combination of two drugs from Gilead, and Bristol-Myers Squibb's (NYS: BMY) Sustiva lead the pack. But even older Viread, still managed a solid 5% year-over-year increase.

Sales of its heart drugs Letairis and Ranexa both increased substantially more than the antiviral franchise -- 22% and 42% increases, respectively -- but they're such a small part of the total that they really can't move the meter much.

Gilead might not be able to keep the double-digit growth going forever; theoretically, the HIV market will get saturated at some point. And competition from ViiV Healthcare, a joint venture of GlaxoSmithKline (NYS: GSK) and Pfizer (NYS: PFE) , will cramp its growth further.

But Gilead does have some options to improve the bottom line even if the top line doesn't improve all that much. Its combination of Truvada and Johnson & Johnson's (NYS: JNJ) recently approved Edurant offers Gilead a bigger piece of the pie than Atripla. And there's the quad pill that should read out phase 3 data shortly; Gilead owns all four parts of that combo pill. Moving patients from Atripla to either drug should result in more income for Gilead even if it doesn't increase revenue.

Further down the line, Gilead will be dependent on its move into cancer. But we won't know for years whether the oncology drugs will help keep the double-digit growth going. For now, investors should focus on the HIV franchise, Gilead's best chance at growing income.

Keep track of all our Foolish analysis on Gilead by adding it to the Fool's free My Watchlist service.

At the time this article was published Fool contributorBrian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Check out his holdings and a short bio. The Motley Fool owns shares of GlaxoSmithKline and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Gilead Sciences, Pfizer, Johnson & Johnson, and GlaxoSmithKline. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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