Why Is Gilead Sciences (GILD) Stock Up Today?

  • Gilead Sciences (GILD) is on the move on Monday, with GILD stock up about 5%.
  • Shares are rallying after the company settled with five generic drugmakers over its HIV and Hepatitis B treatments.
  • The generic drugmakers will receive non-exclusive licenses to the patents, but cannot begin selling generic versions until next decade.
GILD stock - Why Is Gilead Sciences (GILD) Stock Up Today?

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Gilead Sciences (NASDAQ:GILD) is up about 5% on Monday, with GILD stock jumping on news the company is finally settling a patent lawsuit. The settlement involves Gilead’s generic HIV drugs, Descovy and Odefsey, as well as its Hepatitis B drug, Vemlidy. Gilead argued other drug makers were infringing on its patent rights for these treatments.

Instead of a long, drawn-out process in court, Gilead reach a settlement with the five generic drug makers: Apotex, Lupin, Cipla, Macleods Pharmaceuticals and Hetero Labs. For what it’s worth, Gilead sold nearly $1.4 billion of Descovy, more than $1 billion of Odefsey and more than $380 million of Vemlidy in the U.S. last year.

Now, these companies will receive non-exclusive licenses to the patents. This will allow them to sell generic versions of Descovy and Vemlidy beginning in October 2031, while generic sales of Odefsey can begin in January 2032.

That buys quite a bit of time for Gilead, hence the reaction in today’s share price.

Is That Enough for GILD Stock?

Shares of GILD stock are now trading at their highest level since Feb. 1 of this year. More so, shares are down “just” 7.8% from this year’s high, almost twice as good as the near-15% decline in the S&P 500.

That said, long-term investors in Gilead Sciences have not been rewarded. Shares remain 20% below the 2020 high and more than 44% below the all-time high from 2015.

Despite the underperformance, investors just can’t help themselves with GILD stock. The company sports an $85 billion market capitalization, pays out a 4.3% dividend yield and trades at roughly 10 times this year’s earnings.

However, it’s stalled for growth. Today’s ruling likely bought Gilead some more revenue — which is great — but it’s still starving for more. Analysts expect revenue to fall 7.6% this year and roughly 2% in 2023. Meanwhile, analysts expect profits to fall about 8.5% this year and another 2.5% in 2023.

Despite the low valuation and solid yield, Gilead’s lack of growth may act as an anchor to GILD stock, although today’s action certainly helps.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


Article printed from InvestorPlace Media, https://investorplace.com/2022/09/why-is-gilead-sciences-gild-stock-up-today/.

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