I've owned shares of Gilead Sciences (GILD 1.91%) for several years. It was fun to be a shareholder when the big biotech stock was skyrocketing, with rapidly increasing sales for its hepatitis C virus (HCV) drugs. And it was miserable owning Gilead stock when the HCV boom turned into a bust.
The company is now at a crossroads of sorts. Gilead has a new CEO and possibly could have a different direction. It makes sense that current shareholders would rethink whether they should hold on to the stock and that other investors would carefully scrutinize the biotech's prospects.
I've been reflecting some on where Gilead goes from here. And I've contemplated one key question in deciding what to do with my current position in the stock: Where will Gilead Sciences be in five years?
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Still dominating in HIV
One part of the answer to that key question is pretty easy to predict. I think that Gilead will still dominate the HIV market in 2024 and beyond.
Sure, the biotech's HIV blockbusters of the past will lose their luster. Atripla and Truvada already face generic competition in Europe. The drugs lose U.S. patent protection in 2021. But that's not too concerning because of Gilead's powerhouse newer HIV drugs -- especially Biktarvy.
Gilead's head of worldwide commercial operations, Laura Hamill, said in the company's fourth-quarter conference call that Biktarvy "remains the best HIV launch of all time in the U.S." The drug is likely to achieve peak annual sales of at least $6 billion, but one analyst thinks Biktarvy could rake in as much as $10 billion per year in the future.
Speaking of analysts, RBC Capital Markets' Brian Abrahams is especially enthusiastic about one of Gilead's HIV candidates in the pipeline. He estimates that the net present value of GS-6207 is more than $20 billion. The appeal of GS-6207 is that it could become the backbone of long-acting combination HIV therapies.
For now, GS-6207 is only in phase 1 clinical studies. But five years from now, it's possible that the drug or a combo therapy including it could be on the market. If so, Gilead could be headed toward an even greater dominance in HIV than it has now.
An emerging leader in other areas
I also expect Gilead to emerge as a leader in at least a couple of other therapeutic areas. Oncology is the most obvious arena since Gilead already has an up-and-coming cell therapy with Yescarta. Also, the company's new CEO, Daniel O'Day, spent his career at Roche, a pioneer in developing personalized medicines for treating cancer.
Gilead is pursuing additional indications for Yescarta. I suspect the drug could become a blockbuster or close to that level within the next five years. Gilead's pipeline also includes several promising cell therapies thanks to its acquisition of Kite Pharma in 2017. It wouldn't be surprising if the company makes additional acquisitions to boost its oncology pipeline with O'Day at the helm.
Another likely arena where Gilead could make a big splash is in immunology. Gilead and partner Galapagos recently reported great results from two late-stage studies of filgotinib in treating rheumatoid arthritis. By 2024, I think that filgotinib could be one of the top immunology drugs on the market.
Gilead announced disappointing results in February from a phase 3 study evaluating selonsertib in treating compensated cirrhosis (F4) in patients with liver disease nonalcoholic steatohepatitis (NASH). The company expects to report results from another late-stage study of selonsertib in patients with bridging fibrosis (F3) due to NASH later this year.
I wouldn't discount the possibility that Gilead will be a key player in the NASH market five years from now, though. The biotech has several other experimental NASH treatments in its pipeline. And with a huge cash stockpile of more than $30 billion, Gilead has plenty of money to fund acquisitions in the NASH space.
What about HCV?
We haven't talked about HCV yet. However, Gilead's HCV franchise will probably still make a significant contribution to revenue five years from now.
The HCV market is now basically a duopoly with Gilead and AbbVie duking it out. Neither party is likely to see much if any growth from their HCV drugs. But there will still be new patients who become infected by the hepatitis C virus.
Gilead's patent for Harvoni doesn't expire until 2030. The patent for Epclusa expires two years later. I think that the biotech's HCV franchise will continue to be a cash cow throughout the next decade.
Transitioning
So where will Gilead Sciences be in five years? Don't expect the company to return to the heady days it enjoyed from 2012 to 2015. On the other hand, don't expect the gloom that Gilead has endured over the last three years.
I think that Gilead is transitioning to become more of a big pharma company than it's been in the past. Big pharma stocks provide different attractions for investors than up-and-coming biotechs do. Instead of sizzling growth, they seek to offer modest growth and strong dividends.
Gilead already checks off the box for the strong dividend. And it should be at the cusp of returning to growth after several years of revenue and earnings declines.
Whether or not you should hold shares or buy Gilead stock depends on what kind of investment you want. For investors wanting high growth, Gilead isn't a great pick. But if you're looking for long-term, "big pharma-ish" growth and dividends, Gilead still appears to be a decent choice.
