First-quarter sales of AIDS drug Truvada rose 11 percent to $657.8 million, while sales of Atripla, which combines Truvada with Bristol-Myers Squibb Co's (BMY.N) Sustiva into a single pill, rose 36 percent to $692.9 million.
However, analysts had expected even higher Truvada sales of $680 million and Atripla sales of $726 million, according to RBC Capital Markets.
The results followed news late on Monday that Gilead had terminated study of an experimental drug for hepatitis C because the drug was causing too much toxicity.
"Their hepatitis C program doesn't look like it's competitive and now you've got a little softness in their HIV revenue," Sanford Bernstein analyst Geoffrey Porges said, adding that investors may be "heading toward the end of their patience."
The company also lowered its outlook for 2010 sales by about $200 million to a range of $7.4 billion to $7.5 billion, citing the impact of recently passed healthcare reform. The new legislation calls on drugmakers to offer higher price rebates for government-funded health plans.
The biotech company posted a first-quarter net profit of $854.9 million, or 92 cents per share, compared with $589.1 million or 63 cents per share a year earlier.
Adjusting for acquisition expenses, restructuring costs and stock-based compensation, the company said it earned 99 cents a share for the quarter. Analysts had expected 96 cents a share, according to Thomson Reuters I/B/E/S.
Quarterly revenue rose 36 percent to $2.09 billion, while product sales rose 24 percent to $1.79 billion. Analysts had expected revenue of $2.07 billion.
Chief Financial Officer Robin Washington said on a conference call that international government pricing pressures and currency exchange rates could also affect sales.
"During the first quarter we have seen increased evidence of additional international government measures to reduce pharmaceutical expenditures including increased rebates, cancellations, and callbacks of price increases," she said.
Gilead said product sales for the quarter were reduced by $29.4 million due to the impact of U.S. healthcare reform legislation.
Royalty, contract and other revenue more than tripled to $297.8 million from $82.9 million. Gilead derives most of its royalty revenue from Roche Holding AG's (ROG.VX) sales of Tamiflu, which has seen strong demand because of the swine flu pandemic.
J&J said its experimental AIDS drug, known as TMC278, was found to be at least as effective as Bristol-Myers' Sustiva in tests the company plans to submit for regulatory approval in the third quarter. J&J is working with Gilead on a single pill that would combine TMC278 with Truvada.
The company said it expects to file for regulatory approval of the new fixed-dose regimen later this year.
Gilead shares, which closed at $45.07 on the Nasdaq, fell to $43.60 in after-hours trading.
(Additional reporting by Bill Berkrot; Editing by Andre Grenon, Richard Chang and Matthew Lewis)
