Biotech Stocks: Gilead Sciences (GILD)
Type: Large-cap stock
Market Cap: $113 billion
Gilead Sciences (GILD) built its reputation on its HIV drug franchise, racking up some $9 billion in sales for drugs like the four-in-one Stribild, as well as Truvada. The company also is successfully expanding beyond its core HIV drug portfolio into Hepatitis C with Sovaldi and Idelalisib, which combats non-Hodgkin’s lymphoma. The orally administered Sovaldi, with its reported cure rates near 90% in clinical trials, has the potential to be a blockbuster drug for GILD.
A couple of headwinds have emerged recently, however: Idenix Pharmaceuticals (IDIX) filed a patent infringement lawsuit against Gilead over Sovaldi; insurers — particularly those that administer Medicaid — are crying foul at Sovaldi’s hefty price tag: $84,000 for a 12-week course of the drug. Unlike many biopharmaceutical treatments that are geared toward rare conditions, the Hepatitis C market is huge globally, raising the possibility that Sovaldi could be one of the most profitable new drug launches in history.
The Takeaway: Although GILD shares have soared 70% in the past year, it’s still trading at just 14 times forward earnings and a price/earnings-to-growth ratio of 0.55, indicating it’s still undervalued. Better still, at a beta of 0.9, it’s less volatile than your typical biotech. If you’re looking for a large cap value stock in the biotech sector that combines size and relative stability with growth, there could be a place for GILD in your portfolio.