The blue chip biotech Gilead Sciences (NASDAQ:GILD) put in yet another poor showing in May. Shares fell 4.73% last month, according to data from S&P Global Market Intelligence. As a result, Gilead's shares are now down by almost 9% for the full year, making it one of the worst-performing large-cap biotech stocks halfway through 2017.
The surprising part is that Gilead's shares slumped last month despite the late-stage success of its next major HIV single-tablet drug regimen: a fixed-dose combination of bictegravir and emtricitabine/tenofovir alafenamide indicated for the treatment of patients with the HIV-1 infection.
This negative market sentiment toward Gilead and many of its large-cap biotech peers appears to be stemming from President Trump's stalled tax overhaul that many onlookers believed had the potential to spur an unprecedented level of consolidation across the biotech and biopharmaceutical industries. Gilead, for instance, has a mountain of cash overseas that could be used to acquire some much-needed revenue and bolster its oncology pipeline. Unfortunately, Trump's tax proposals seem to be on the back burner for the time being.
Gilead's stock is likely to remain in free-fall mode until management decides to buy one or more companies with products already on the market. Gilead's top line, after all, is forecast to drop by another 9% next year, and its all-important hepatitis C franchise is showing absolutely no signs of rebounding to change this downward trajectory.
The good news is that short-sellers have been steadily backing off of this stock since the start of the year. Gilead's short interest, for example, dropped by around 30% compared to where it was in the middle of January. In other words, even short-sellers appear to be bracing for the possibility of a major acquisition and a stock rebound. Investors with a strong appetite for risk might want to consider grabbing some shares of this beaten-down biotech giant while it remains in the market's proverbial doghouse.
George Budwell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has the following options: short June 2017 $70 calls on Gilead Sciences. The Motley Fool has a disclosure policy.