Biotech giant Gilead Sciences, Inc. GILD has put up a strong performance amid a volatile market. Shares of this biotech giant have gained 26.8% in the past six months against the industry’s decline of 12.2%. The stock has outperformed the sector and the S&P 500 Index in this timeframe.
Approval of new drugs, encouraging pipeline progress, positive data readouts and strong quarterly results have boosted investors’ sentiment in the past six months. During its third-quarter earnings release, GILD has raised its annual guidance for sales and earnings, driven by growth in Veklury (COVID-19 treatment) sales.
Gilead Outperforms Industry & Sector
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GILD’s Leading HIV Franchise Maintains Momentum
Gilead has a market-leading portfolio of HIV treatments. The company’s consistent efforts to develop additional innovative HIV treatments are being appreciated by investors.
With a market share of more than 49% in the United States at the end of the third quarter, its flagship HIV therapy, Biktarvy, continues to fuel the top line. The strong momentum in Biktarvy has enabled Gilead to increase its HIV sales target to 5% in 2024 from the earlier estimate of 4%.
Gilead’s efforts to innovate its HIV portfolio are impressive. The company’s pipeline candidate, lenacapavir, demonstrated 100% efficacy for the investigational use of HIV prevention in cisgender women. Data reinforce that twice-yearly lenacapavir could be a highly effective and potentially game-changing HIV prevention option.
The successful development and potential approval of lenacapavir for the prevention of the disease should solidify Gilead’s HIV franchise, as lenacapavir needs to be taken twice yearly, unlike daily oral pills.
New Drugs, Recent Collaborations Strengthen GILD’s Portfolio
In August 2024, the FDA granted accelerated approval to seladelpar for the treatment of primary biliary cholangitis (PBC), in combination with ursodeoxycholic acid (UDCA), in adults who have had an inadequate response to UDCA or as monotherapy in patients unable to tolerate UDCA.
The candidate was approved under the brand name Livdelzi. In March 2024, GILD acquired CymaBay Therapeutics Inc. for $4.3 billion, adding Seladelpar to its portfolio/pipeline. Livdelzi's approval strengthens GILD’s liver disease portfolio and validates its CymaBay acquisition.
The Committee for Medicinal Products for Human Use of the European Medicines Agency (EMA) recently gave a positive opinion recommending the approval of seladelpar for the treatment of PBC in the EU. A final decision is anticipated in the first quarter of 2025.
Gilead recently announced a strategic partnership with LEO Pharma, a Danish company. The deal strengthens Gilead’s inflammation research portfolio by adding LEO Pharma’s preclinical oral STAT6 Program, including targeted protein degraders.
The company had earlier entered into a multi-target research collaboration with Terray Therapeutics to discover and develop novel small-molecule therapies for multiple targets. It also entered into an exclusive option and license agreement with Tubulis to develop an antibody-drug conjugate candidate for a select solid tumor target.
GILD’s Oncology Franchise Faces Challenges
Gilead’s oncology portfolio, comprising the Cell Therapy franchise and breast cancer drug Trodelvy, has diversified the company’s overall business. However, the Cell Therapy franchise, comprising Yescarta and Tecartus, is currently under pressure due to competitive headwinds, which are expected to continue in 2025.
Breast cancer drug Trodelvy has performed well since its approval. However, Gilead’s efforts to expand Trodelvy’s label suffered a setback due to the failure of its late-stage confirmatory TROPiCS-04 study on Trodelvy in locally advanced or metastatic urothelial cancer. In January, the late-stage study evaluating Trodelvy in previously treated metastatic non-small cell lung cancer also failed. These failures have somewhat dented Gilead’s efforts to strengthen its oncology franchise.
Nonetheless, the FDA recently granted the Breakthrough Therapy Designation to Trodelvy for the treatment of adult patients with extensive-stage small cell lung cancer whose disease has progressed on or after platinum-based chemotherapy.
Valuation & Estimates
According to the price/earnings ratio, GILD’s shares currently trade at 12.13x forward earnings, lower than the large-cap pharma industry’s average of 15.29 but higher than its mean of 10.43.
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The Zacks Consensus Estimate for its 2024 earnings per share (EPS) has moved up 12 cents to $4.36 over the past 60 days. It’s worth noting that the annual earnings estimates have taken a hit due to acquisition-related expenses in 2024. The EPS for 2025 has also gained 16 cents during the same time frame.
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Conclusion
Gilead’s efforts to constantly innovate its HIV portfolio should enable it to maintain growth amid competition from GSK plc GSK. The company’s strategic deals and acquisitions to diversify its business are encouraging.
GILD has also collaborated with Merck MRK to evaluate the investigational combination of islatravir and lenacapavir for the treatment of HIV. Recently reported data showed that a treatment switch to an investigational oral once-weekly combination regimen of islatravir and lenacapavir maintained viral suppression in adults at week 48. Islatravir is Merck’s investigational nucleoside reverse transcriptase translocation inhibitor (NRTTI) under evaluation in multiple ongoing early and late-stage clinical studies in combination with other antiretrovirals for the treatment of HIV-1.
However, the oncology portfolio is likely to be under pressure in 2025. Hence, we recommend prospective investors to stay on the sidelines at current levels and see how this business pans out for GILD.
For investors already owning the stock, Gilead has been consistently increasing and paying out dividends. Its strong cash position (as of Sept. 30, 2024, GILD had $5 billion of cash, cash equivalents and marketable debt securities) indicates that the current yield of 3.35% is likely to be sustainable.
Gilead currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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