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Is Gilead Sciences Stock a Buy?

Gilead Sciences (NASDAQ:GILD) has been at the forefront of the coronavirus treatment space since the early days of the pandemic. During this past spring and early summer, the company donated almost a million doses of its antiviral medication, remdesivir, to the U.S. government in hopes that it would be useful against the coronavirus. It was found to have moderate benefits, and in late June, CEO and chairman Daniel O’Day announced the price going forward.

The company will charge developed countries $2,340 per treatment course of remdesivir, while private insurers in the U.S. will be charged $3,120 per course. Considering that Gilead intends to produce more than 2 million courses of the antiviral drug before the year is out and millions more next year, remdesivir has significant blockbuster potential.

Gilead Sciences hasn’t been immune to the ups and downs of the coronavirus stock market. To be fair, neither have most companies. But is Gilead Sciences a stock you can buy and hold in the current recession and beyond?

man holding money with masked globe

Image source: Getty Images.

A robust balance sheet despite pandemic losses 

At the start of 2020, no one could have predicted the massive volatility that was about to befall the market as the devastating coronavirus pandemic took hold. Last year was a good one for Gilead Sciences, in which it reported $22.4 billion in revenue, slightly up from 2018’s full-year revenue of $22.1 billion. While other companies were scrambling in the volatile first quarter of this year, Gilead’s revenue actually increased. The company’s Q1 2020 revenue was up 5% on a year-over-year basis, even though its net income dropped 21% to $1.6 billion.

In Gilead’s anxiously awaited second-quarter and first-half results, released July 30, Q2 revenue fell below analysts’ expectations at $5.1 billion. For the first half of 2020, the company reported $10.7 billion in revenue, slightly down from $11 billion during the same period last year. Despite this, management raised its revenue guidance for 2020, from between $21.8 billion and $22.2 billion back in February to between $23 billion and $25 billion today. This is a clear sign of management’s confidence in its ability to come out stronger on the other side from any negative financial effects it has experienced due to the pandemic.

A solid core portfolio of products 

There’s no doubt that if remdesivir reaches the blockbuster status it looks likely to achieve, the drug could be Gilead’s biggest win to date. Gilead just submitted a New Drug Application to the U.S. Food and Drug Administration (FDA) for remdesivir on Aug. 10. The FDA previously granted an emergency use authorization (EUA) for remdesivir on May 1.

The good news is, the company also has a solid core portfolio of products besides remdesivir — which I would argue is one of the reasons revenue didn’t fall further in the past two quarters. Sales in Gilead Sciences’ HIV segment rose 6% during the first half of 2020, totaling $8.1 billion. The company’s HIV drug Biktarvy has been a major revenue driver this year, with sales of $1.3 billion in Q2 and $2.8 billion in the first six months of 2020. Another one of Gilead’s prescription medicines for HIV, Atripla, produced $95 million in U.S. sales in the second quarter. A third, Odefsey, was responsible for $273 million of the company’s revenue during Q2. 

To buy or not to buy 

There’s been speculation that too much competition may eventually drown out remdesivir’s star power. I would maintain that seems unlikely anytime soon. Given the fact that Gilead Sciences plans to manufacture millions of doses this year and next, and the positive data from the phase 3 SIMPLE-Severe clinical trial of remdesivir released in July, I suspect the drug will continue to be in high demand. Gilead has also started a phase 1a clinical trial of an inhaled form of remdesivir, which if approved could expand the drug’s long-term marketability.

Gilead Sciences looks well-poised for future success, bolstered by its robust HIV business and the niche it is carving in the coronavirus therapeutics space. Gilead was also one of the very few stocks that rose rather than fell during March’s market lows. With an attractive dividend yield of about 4% and a relatively cheap share price hovering around $68, Gilead Sciences is a great coronavirus stock for both newbie and veteran investors.

 

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