Gilead Sciences (GILD) is a researched based biopharmaceutical company focused on developing treatments for human immunodeficiency virus (HIV), liver diseases such as chronic hepatitis B virus (HBV) infection and chronic hepatitis C virus (HCV) infection, oncology/inflammation and serious cardiovascular and respiratory conditions.
Gilead’s 2013 highlights include Food and Drug Administration Approval (FDA) approval for Sovaldi ®, a once-daily oral for the treatment of HCV, launched its HIV Treatment, Stribild®, in Europe and filed for FDA and European Medicines Agency marketing approval for idelalisib, an investigational treatment for indolent non-Hodgkin’s lymphoma (iNHL) and relapsed chronic lymphocytic leukemia (CLL). At the end of 2013, Gilead had more than 200 active clinical studies, 60 of which were in Phase 3.
Gilead Earnings Summary
In January, Gilead reported fourth quarter of 2013 revenues increased 21% to $3.12 billion and net income of $791.4 million, with flat earnings per share compared to the same period a year ago. Non-GAAP earnings per share increased to $0.55 from $0.50. Full year 2013 revenue increased 15% to $11.2 billion and net income increased to from $2.59 billion ($1.64 per share) to $3.07 billion ($1.81 per share).
In the first quarter Gilead reported total revenue increased to $5 billion from $2.53 billion the prior year with net income increasing to $2.33 billion ($1.33 per share) from $722.2 ($0.43 per share) driven by record Sovaldi product sales, up 104% year over year. In the second quarter, Gilead reported total revenue increased to $6.53 billion from $2.77 billion for the same period in the prior year. Net income for the second quarter was $3.66 billion ($2.20 per share) compared to $772.6 million ($0.46 per share) the same period in the prior year with Sovaldi® product sales continuing to be the driver of growth.
Gilead – Stock Analysis
Earlier in October, the FDA approved Harvoni®, Gilead’s once a day treatment for chronic hepatitis C infection in adults. Harvoni® combines the NS5A inhibitor ledipasvir with Sovaldi®. Although the approval was widely expected, it is a good sign that the growth will continue into in the Hepititus C treatment arena for Gilead for some time. Of course, all is not fair in love and pharmaceuticals and Gilead is in ongoing litigation with Roche (RHHBY) and Merck (MRK) in over Gilead’s blockbuster drug Sovaldi® which has the potential to impact profits if not settled in Gilead’s favor.
Gilead’s stock has soared over 40% this year on sales and profits from Sovaldi®
The 12-month analyst consensus price target is $116.5 per share, with top line price targets at $142. Gilead looks cheap compared to peers with a price to earnings ratio of 24.2 compared to an industry average of 60 which is not unusual for the drug companies. Gilead’s price to earnings growth of 0.5 makes the stock appear cheep with huge potential for next year.
Gilead has a track record of plowing money back into research and development with annual increases in research and development expenses as a percentage of revenue and dollar and dollar as well. Historically most of the Gilead’s revenue and profits has come from its HIV treatments, which also provide downside protection if sales of Sovaldi® slow.
Gilead’s stock is a solid buy with good price momentum, a current price that appears to undervalue next year’s earnings growth and good management track record.
As of this writing, Kenneth Fick did not hold a position in any of the aforementioned securities. Write him at kfick@piercethefog.com or follow him on his blog at www.piercethefog.com.
