Gilead Sciences (NASDAQ:GILD) has always been an aggressive company, and GILD stock has always been an aggressive biopharmaceutical play.
You might even call it the Uber (NYSE:UBER) of biopharma. The company is essential, but its reputation is that of a predator, which may yet cost shareholders.
Gilead first came to prominence on Wall Street after pricing its Hepatitis C drug, Sovaldi, at $84,000 per treatment in 2014. A year later it priced the follow-on, Harvoni, at $94,500.
The drugs worked, but there was a backlash. England was forced to ration treatment. Gilead began offering a “cheaper” generic version at $24,000 in 2018.
Now, the shares are hot again because its remdesivir may help people with the novel coronavirus.
But its past may be catching up with it.
Will GILD Stock Soar on a Covid-19 Cure?
In March, Gilead had remdesivir called an “orphan drug,” after getting $79 million in government funding to develop it for the treatment of Ebola, another viral disease.
It applied for this highly profitable status on March 23, after it already had trials underway against Covid-19. The new virus is structurally similar. In its early study, two-thirds of severely ill patients showed “some” improvement.
Remdesivir sent the price of Gilead stock up 21% in just three months. It opened for trade April 15 at about $76 per share. That’s a $98 billion market capitalization on sales of $22.5 billion.
As part of its plan to profit from remdesivir Gilead initially sought to restrict access, ending the compassionate use program under which people were being treated. It has now reversed that policy. It says it is “turbocharging” production, with plans to offer 500,000 courses of treatment by fall. CEO Daniel O’Day now promises that the drug will now be affordable, but it could still be profitable.
All this before we know if the drug really works. A Chinese trial of the drug, in early-stage patients, was suspended April 15. Other trials around the world are continuing.
Gilead’s Reputation
The pandemic is shining a light on Gilead and its past may now catch up with it.
That past includes charges Gilead delayed a safe HIV drug by five years to extend its monopoly on an older drug. It includes charges it used the “double Irish” tax arrangement to avoid paying U.S. taxes on overseas profits.
Gilead is also dealing with a patent fight concerning Kite Pharma, the immunotherapy company it bought for $11.9 billion in 2017. Gilead has since had to write down much of the purchase price.
Now it turns out Kite may have stolen key technology from Juno Therapeutics, which Bristol-Myers Squibb (NYSE:BMY) picked up in buying Celgene recently. Gilead failed to overturn a $752 million patent infringement verdict. A judge has now increased the penalty to $1.2 billion, calling the infringement “willful.”
The Kite disaster brings up comparisons to Uber, which saw the former head of its self-driving car unit indicted for stealing trade secrets from Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). He now wants Uber to pay his fines, claiming it knew about the theft when it hired him.
The Bottom Line on GILD Stock
Gilead is an industry disruptor. It has pushed the envelope in terms of pricing, taxation and now allegedly patent policy. Anger over such tactics is growing, which is why it backed away from trying to win big profits with remdesivir.
GILD stock is in favor with investors because it has been using its Harvoni cash. In addition to Kite it recently bought Forty Seven, a cancer drug maker, for $4.9 billion.
Gilead has created enormous shareholder value. Over the last 10 years its market cap is up 292%.
But analysts, wary of its legal troubles, have cooled on GILD stock. Gilead’s current price is almost equal to its one-year price target, according to TipRanks. Only half the analysts following Gilead still rate it as a buy, and three are telling investors to sell.
You always buy a company’s future, not its past. That’s why markets are rising even while the economy is cratering. If you’re buying Gilead’s future today, you’re not just buying financial risks.
You also may be buying political risks.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.
