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Zacks’ Insights: Apple Inc. (AAPL), Gilead Sciences, Inc. (GILD), Catalyst Pharmaceuticals Inc (CPRX),

Apple Inc.

After the bell Tuesday, tech bellwether Apple Inc. (NASDAQ:AAPL) reported fiscal Q2 2016 earnings, and the company posted its first earnings miss in at least the past 5 quarters. Earnings of $1.90 per share missed the $1.97 Zacks consensus estimate, and revenues of $50.6 billion were short of the $51.5 billion expected in the Zacks consensus.

Sales of Apple’s principle driver, the iPhone, were weaker than expected — 51.2 million iPhones were sold in Q2, where 51.5 million had been expected. This represents a fall of 16 percent year over year. iPad sales, on the other hand, were up in the quarter: 10.3 million beat the expected 9.9 million. Mac sales continued to dwindle, selling 4.0 million as opposed to the 4.6 million expected.

Part of this miss is a result of very tough year-over-year comps — the iPhone 6 was a huge hit back when it first came out, and version 7 is not expected until later this year. But sales in China were also down 26 percent in the quarter, which may speak to any number of things: a sluggish Chinese economy, relative market saturation of iPhones, a stronger dollar keeping iPhones more expensive, etc. Yet CEO Tim Cook said, “We feel good about China” in Apple’s press release as earnings were posted.

Apple had been carrying a Zacks Rank #3 (Hold) ahead of the earnings report, but with a somewhat downward bias: several downward revisions for Q2, Q3, fiscal 2016 and 2017 have pulled down estimates over the past 60 days. We may see further revisions to the lower side from analysts in the coming days as they digest Apple’s earnings results.

The company also bought back $50 billion in AAPL stock and raised its dividend 10 percent. This, however, has not been enough to keep shares tumbling more than 6 percent in the after-market, and this follows -5 percent over the last 5 regular trading days and -20 percent year over year.

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Gilead Sciences, Inc.

Gilead Sciences, Inc. (NASDAQ:GILD) is scheduled to report first-quarter 2016 results on Apr 28, after the market closes. Last quarter, the company had comfortably surpassed expectations with a positive earnings surprise of 12.37%.

Will this biotech major be able to beat estimates this time around as well? Let’s see how things have shaped up for this quarter.

Gilead’s blockbuster hepatitis C virus (HCV) drug Harvoni should continue to contribute significantly to the top line in the first quarter of 2016 as well. Moreover, Harvoni sales should benefit from label expansion that came last November. However, sales of another HCV drug at Gilead, Sovaldi, has been witnessing a slowdown (declining 10.7% year over year in the fourth quarter of 2015) due to the availability of newer HCV therapies including Harvoni and AbbVie Inc.’s Viekira Pak.

On the fourth-quarter call, Gilead had said that its HCV franchise should benefit from launches of HCV products in international markets as well as continued launches across Europe in 2016. While the company expects the number of patients in the U.S. to be similar to 2015 levels, it should grow in Europe. Notably, the company expects to see more patients being treated with shorter durations.

Investor focus will primarily remain on the impact of the recently launched, lower priced HCV drug, Zepatier.

Other anti-viral products, such as, Complera/Eviplera should aid revenues whereas Atripla should continue declining. Focus would also be on Genvoya, the company’s first tenofovir alafenamide (TAF)-based regimen for the treatment of HIV-1 infection. The drug has been off to an encouraging start since its launch in Nov 2015. The company noted on the fourth-quarter call that 80% of Genvoya sales came from switches from another HIV-1 drug, Stribild, belonging to Gilead.

Meanhwile, two other TAF-based regimens for the treatment of HIV – Odefsey and Descovy – recently gained approval.

For 2016, Gilead expects net product sales in the range of $30–$31 billion. On the first quarter call, investors could see an update on the guidance based on the company’s performance. Meanwhile, the company is actively pursuing share repurchases as well as partnerships/acquisitions to expand its product portfolio beyond antivirals into other therapeutic areas. This should be another area of focus.

Catalyst Pharmaceuticals Inc

Catalyst Pharmaceuticals Inc (NASDAQ:CPRX) stock crashed over 50% after the company announced that the FDA has requested additional data in its resubmission of a new drug application for Firdapse, a treatment for Lambert-Eaton myasthenic syndrome.

In February, Catalyst hits a major obstacle when it received a “refusal-to-file” letter from the FDA. The regulatory agency determined that Catalyst had not submitted sufficient information for it to complete a preliminary review of Firdapse.

The FDA has now stated that Catalysts needs to submit not one, but two sets of positive results from a studies of patients with Lambert-Eaton myasthenic syndrome. The company will also needs to conduct several toxicology studies.

The issue with these new studies, aside from the fact that Catalyst’s portfolio of approved drugs remains empty, is that they are often very costly and time consuming.

“We are surprised with the FDA’s request for an additional clinical study for Firdapse, but are encouraged that the agency is open to an efficient, small short-term study design. We are currently in discussions with the FDA, and our clinical experts regarding the protocol and logistics for this confirmatory study,” said Catalyst CEO Patrick J. McEnany.

Just 10 days ago, Catalyst reported its fourth-quarter 2015 earnings, posting a loss of 7 cents on R&D expenses that were up over 60% year-over-year. More time and money researching Firdapse is simply something that Catalyst cannot afford right now.


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