Large-Cap: Gilead Sciences
Market Cap: $55 billion
Shares of Gilead Sciences (NASDAQ:GILD) set a new 52-week high this week on positive clinical trial news. Gilead revealed that combining three oral medicines — sofosbuvir and daclatasvir and the generic antiviral ribavirin — into a single pill cured 100% of hepatitis C patients by week four of the 12-week trial. Those results stole the thunder from other players in the space, including Abbott Laboratories (NYSE:ABT) and Vertex Pharmaceuticals (NASDAQ:VRTX).
Most biopharma drugs target rare conditions, but the market for hepatitis C drugs is huge. The liver disease affects more than 3 million patients in the U.S. and an estimated 180 million worldwide. Although GILD’s combo trial only involved 25 patients, cure rates on other therapies average between 40% and 79%; many have significant side effects.
Gilead also has a strong HIV drug franchise — including the just-approved four-drug HIV therapy Stribild, which helped boost the company’s third-quarter revenue by 14%.
Normally I’d worry about buying a stock that’s risen 81% in the past year and just set a new high, but I think GILD’s strong HIV and hepatitis C franchises position it to be a high-growth gazelle over the next 12 to 18 months. The company also is financially sound, running at an operating margin of 44% and boasting levered free cash flow of $3.4 billion. That said, you might be able to get a better bargain in December after the exuberance over the trial has faded.