What's Not to Like About Gilead?

To be honest, there's nothing not to like about Gilead Sciences (Nasdaq: GILD  ) . Granted, that's not the most exciting premise for an article, but since Gilead on Wednesday released another solid quarter of financial growth and progress with its pipeline, there's just not a whole lot to complain about.

Revenue was up 40% for 2007, with sales of HIV drug Atripla (partnered with Bristol-Myers Squibb (NYSE: BMY  ) ) up 89% year over year in the fourth quarter. Non-GAAP earnings were $1.81 per share, a 33% increase over 2007. Like I said, there's not much to complain about.

On the pipeline front, last quarter, Gilead announced underwhelming phase 1 data for its hepatitis C antiviral drug candidate GS9190 at the American Association for the Study of Liver Diseases conference. It has been a tough road for Gilead in the hepatitis C arena. Polymerase inhibitor GS9190 showed mediocre performance, and partner Achillion Pharmaceuticals (Nasdaq: ACHN  ) had to go back to the drawing board with its protease inhibitor program earlier in the year.

The clinical trial pathway for Gilead's anti-HIV integrase inhibitor, Elvitegravir, also got harder following the approval of Merck's (NYSE: MRK  ) rival integrase inhibitor, Isentress, in October. Gilead now plans to test Elvitegravir head-to-head against Isentress in a non-inferiority study. Actually having to match a similar active comparator drug raises the bar for the 48-week study's success.

Looking ahead to 2008, Gilead is going to be getting a lot of FDA regulatory news this year. The PDUFA date for its cystic fibrosis drug is Sept. 16, and a regulatory decision from the FDA on the label expansion for HIV therapy Viread into hepatitis B is also expected in the third quarter. On the financial front, Gilead has guided for product sales to be up 26% to 29% in 2008.

Seeing as Gilead is looking more and more like a diversified pharma with a robust clinical-stage pipeline and growing cash flows, the financial community wouldn't start weeping if the company started to use some of its plentiful free cash flow to fund a dividend. An aggressive $1 billion worth of annual cash could fund a 2.4% dividend yield, for example. Other than that, it's hard not to get excited about Gilead from both a valuation and a performance standpoint.


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