Gilead Sciences (GILD -1.15%) has climbed 18% this year as investors applauded its investigational coronavirus treatment, remdesivir. Though the gain may seem impressive, it's far less than shares of clinical-stage biotech companies working on vaccines or therapies for COVID-19, the illness caused by the novel coronavirus. Shares such as Inovio Pharmaceuticals (INO -7.86%) and Moderna (MRNA -1.39%) have jumped 139% and 108%, respectively. And Gilead stock, even with its "modest" increase, has reached Wall Street's average price target. Does this mean Gilead's gains are over?
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Well, the answer really depends on what type of gains. First, let's talk about the coronavirus news that has moved the stock. These "coronavirus gains" have come without any positive information about remdesivir. At the moment, the drug is being tested in seven clinical trials to determine safety and efficacy, as well as whether treatment time may be reduced to five days from 10.
Data by the end of April
While some studies are evaluating the drug in patients with severe cases of COVID-19, others are testing the treatment in moderate cases. The company said it expects to have preliminary data from the study involving severe patients by the end of this month and will share it as soon as possible. If news is positive, investors can expect Gilead shares to climb. Conversely, any setback may weigh on the shares. We already saw a glimpse of the share reaction this week. A trial of the drug in China was suspended due to lack of eligible patients, and Gilead stock slipped 4%. Then on April 16, STAT reported a Chicago trial of remdesivir has resulted in quick improvement in respiratory problems and fever so far, with most patients discharged from the hospital within a week. Shares rose 12% in pre-market trading the next day.
Though coronavirus news has spurred share movement over the past few months, in the long term, news about the rest of Gilead's pipeline and commercialized products will take over. And here, there are plenty of reasons to expect positive share performance beyond the increase we've seen this year so far. One of them is Gilead's HIV program, with sales of its blockbuster HIV drug, Biktarvy, quadrupling to $4.7 billion last year from the prior year's level. Sales of the drug are expected to climb to nearly $7 billion in 2024, according to EvaluatePharma. As such, it would take the spot as the No. 10 best-selling drug worldwide for that year, the research shows.
A growing market
Gilead's entire HIV program is growing -- and so is the HIV drug market. Sales of all of Gilead's HIV drugs totaled $16.4 billion last year, up 12% from the previous year. At a compound annual growth rate of 6% as of last year, the global HIV drug market is forecast to reach $40.7 billion by the end of 2026, according to Fortune Business Insights. Though sales of Gilead's chronic hepatitis C drugs have been on the decline, gains in the HIV platform along with new products on the horizon may compensate.
And speaking of new products, here is one to watch for: A Food and Drug Administration decision on Gilead's rheumatoid arthritis drug, filgotinib, may be the next catalyst (besides news from remdesivir trials) for the shares. Gilead submitted the drug for priority review in December, which means a decision may come as early as June. Priority review shortens the timeframe from 10 months to about six. EvaluatePharma predicts filgotinib could bring in global sales of $1.3 billion in 2024, becoming another blockbuster for Gilead.
Though the shares have had a good year so far, Gilead remains reasonably priced in relation to book value. The company has traded at about four times book value over the past two years, down from more than 10 just four years ago. Gilead trades at about 18 times earnings, down from more than 30 during the second half of last year. In the near term, possible good news about remdesivir trials may support the stock, but long-term biotech investors should look to the HIV program and filgotinib to take the stock higher from there.
