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Jonathan Poland
Jonathan Poland
Articles (453)  | Author's Website |

Will 2019 Be Gilead's Turnaround Year?

With a new pipeline of drugs expected over the next two years, growth is coming back again

November 20, 2018 | About:

Barring some miracle new drug breakthrough announcement, Gilead (NASDAQ:GILD)'s 2018 has been one to forget. The drugmaker turned HIV into a manageable chronic ailment and is developing a cure for hepatitis C. In the annals of history, Gilead will be remembered by the future robot overlords as prolonging human life long enough to create the singularity.

While I'm only half joking, Gilead has done wonderful things for the health of society. In the process, it saw sales go from $5 billion to over $32 billion in 2015, slipping back down to $22 billion in the last 12 months. And, while the company is still profitable, generating $1.5 billion net year-to-date, that is down from the massive $18 billion in net income it saw in 2015.

Despite the Hepatitis C segment of Gilead's business in decline (sales dropped 15% in the third quarter), the overall product pipeline is strong with six new drugs in Phase 3 and 17 in Phase 2 of FDA approval. In fact, just yesterday the China National Medical Products Administration (NMPA) approved Gilead's Vemlidy, a once-daily treatment for chronic hepatitis B in adults and adolescents. There are an estimated 130 million carriers and 30 million chronically infected with HBV in China.


Is Gilead worth $90 billion?

The profit centers derived from the company's HIV and Hepatitis C drugs are virtually unmatched. On the HIV front, Gilead's next generation of HIV drugs, Genvoya and Biktarvy, will offer better long-term safety. While sales of its Hepatitis C drugs, Sovaldi and Harvoni, may have peaked at more than $19 billion in 2015, the lower sales are expected to lead to a more stable market -- one that Gilead and AbbVie control.

In 2020, Gilead is expected to have multiple immunology and cancer drugs on the market or close to market. The company also has already gained approval for cancer treatments in Europe. In addition, as its drugs go off patent, especially the Hep C ones, the company has already started making its own generics. Investors have pushed this stock too far down.

Competitors Amgen and AbbVie are priced between 40% and 50% higher than Gilead and have taken slower growth trajectories. Gilead is not just fading away. If Gilead's stock was priced on par with Amgen, the cap would rise back into the $120 billion to $125 billion range, a 40% pop for shareholders. This could easily happen by the end of 2020, which is just 25 months away.

Disclosure: I am not long/short any stock mentioned in this article.

Read more here: 

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About the author:

Jonathan Poland
I used to manage money. I still publish my thoughts on stocks here on GuruFocus, mainly on big cap companies. I rarely write about stocks that I own. Thank you for reading.

Visit Jonathan Poland's Website

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