Biotech giant Gilead Sciences, Inc. GILD has gained 16.8% in the past three months compared with the industry’s growth of 7.6%. The stock has also outperformed the sector and the S&P 500.
The stock’s performance was hit by pipeline setbacks earlier in the year. Nonetheless, this month, Gilead reported better-than-expected second-quarter results and raised its annual earnings guidance. Revenues increased 5% from the year-ago quarter’s level due to high HIV, oncology and liver disease drug sales. Earnings also gained on higher revenues.
Approval of new drugs and encouraging pipeline progress have also boosted investors’ sentiment of late.
Gilead Outperforms Industry, Sector & S&P 500
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GILD's Leading HIV Franchise Maintains Momentum
Gilead’s leading HIV franchise also maintains momentum and the company’s efforts to develop innovative HIV treatments are being appreciated by the investors.
With a market share of 49% in the United States at the end of the second quarter, its flagship HIV therapy, Biktarvy, continues to maintain its strong growth, thereby fueling the top line. The strong momentum in Biktarvy has enabled Gilead to maintain its HIV sales target of 4% in 2024.
Gilead’s efforts to innovate its HIV portfolio are impressive. The company’s pipeline candidate, lenacapavir, demonstrated 100% efficacy for the investigational use of HIV prevention in cisgender women. Gilead expects an update on ongoing studies on lenacapavir later this year or early next year, with a commercial launch as early as late 2025.
The successful development and potential approval of lenacapavir for PrEP should solidify Gilead’s HIV franchise, as lenacapavir needs to be taken twice yearly, unlike daily oral pills.
PBC Drug Strengthens GILD's Portfolio
Earlier in the month, the FDA granted accelerated approval to seladelpar for the treatment of primary biliary cholangitis (PBC), in combination with ursodeoxycholic acid (UDCA), in adults who have had an inadequate response to UDCA, or as monotherapy in patients unable to tolerate UDCA.
The candidate was approved under the brand name Livdelzi. Seladelpar was added to GILD’s portfolio/pipeline through the acquisition of CymaBay Therapeutics Inc. for $4.3 billion in March 2024. The approval of Livdelzi strengthens GILD’s liver disease portfolio. Seladelpar is also under review in the UK and EU.
Pipeline Setbacks Weigh
Gilead’s oncology portfolio, comprising the Cell Therapy franchise and breast cancer drug Trodelvy, has diversified the company’s overall business. The Cell Therapy franchise, comprising Yescarta and Tecartus, continues to witness a steady increase in sales, primarily due to higher demand for Yescarta in relapsed or refractory (R/R) large B-Cell lymphoma and Tecartus in R/R acute lymphoblastic leukemia and mantle cell lymphoma.
Breast cancer drug Trodelvy’s performance has been strong since its approval. The drug is driving Gilead's efforts to build a strong oncology franchise, especially given the current focus on ADCs.
However, Gilead’s efforts to expand Trodelvy’s label suffered a setback due to the failure of its late-stage confirmatory TROPiCS-04 study on Trodelvy in locally advanced or metastatic urothelial cancer. In January, the late-stage study evaluating Trodelvy in previously treated metastatic non-small cell lung cancer also failed. These failures have somewhat dented Gilead’s efforts to strengthen its oncology franchise.
Valuation & Estimates
Going by the price/sales ratio, GILD’s shares currently trade at 3.45x forward sales, higher than 2.23 for the industry but slightly lower than its mean of 3.42.
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The Zacks Consensus Estimate for its 2024 earnings per share (EPS) has moved up 5 cents to reach $3.78 over the past 30 days. It’s worth noting that the annual earnings estimates have taken a hit due to acquisition-related expenses in 2024. The EPS for 2025 has gained a cent during the same time frame.
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Conclusion
Gilead’s efforts to constantly innovate its HIV portfolio should enable it to maintain growth amid competition from GSK plc GSK. The company’s strategic deals and acquisitions to diversify its business are encouraging. Gilead entered into a research collaboration, option and license agreement with Merus MRUS to discover novel dual tumor-associated antigens targeting trispecific antibodies. Gilead has also partnered with Arcus Biosciences to develop oncology and inflammation therapies.
However, its recent pipeline setbacks are a matter of concern. Hence, we advise investors to exercise caution for the time being as the company transitions its overall portfolio and waddles through expenses.
At current levels, we would not advise the investors to buy the stock. For investors already owning the stock, staying invested will be a prudent move. A key attraction to staying invested is the company’s dividend yield. Gilead has been consistently increasing and paying out dividends. Its strong cash position (as of Jun 30, 2024, GILD had $2.8 billion of cash, cash equivalents and marketable debt securities) indicates that the current yield of 4% is likely to be sustainable.
Gilead currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
