For the last three years, Gilead Sciences (GILD -0.84%) hasn't done much more than treading water. Sure, the stock is up during the period, but all of the gains came in 2020 with COVID-19 drug remdesivir capturing investors' attention.
What's the outlook for Gilead over the next three years? Don't expect the company to merely tread water going forward. Gilead has a lot of opportunities in the near future that should translate to much better growth than in its recent past.
Image source: Getty Images.
Growth on the way
Let's first address Gilead's challenges. The company's hepatitis C virus (HCV) franchise isn't going to be a growth driver and could still weigh on Gilead's overall revenue. Truvada faces generic competition in the U.S. this year. Gilead's other older HIV drugs will continue losing steam as patients switch to its newer products.
But there are silver linings in those clouds. Gilead expects its HCV sales to stabilize for the most part and continue to generate strong cash flow. The company's new HIV drugs, particularly Biktarvy, should fuel overall HIV franchise growth.
Gilead's CAR-T therapy Yescarta also is picking up momentum. It could soon be joined by another CAR-T therapy, KTE-X19, which awaits U.S. and regulatory approval for treating mantle cell lymphoma.
Actually, several new drugs could be on the way from Gilead's pipeline. Remdesivir appears to be close to a slam-dunk for winning FDA approval in treating COVID-19. It remains to be seen how Gilead will price the drug, but it will almost certainly have another blockbuster on its hands.
The biotech also hopes to get a thumbs-up from the FDA this year for filgotinib in treating rheumatoid arthritis. Gilead is evaluating the drug in treating other imunology indications as well, including Crohn's disease, psoriatic arthritis, and ulcerative colitis. Peak sales in the ballpark of $4 billion could be achievable, assuming the drug wins approval for all of its targeted indications.
Looking farther down the road, Gilead could be set for huge revenue growth in the HIV arena. The company is evaluating a long-acting HIV therapy in phase 2 clinical studies that just might become its biggest-selling drug yet if all goes well.
Dividends flowing
Even while Gilead's revenue and earnings were sliding over the last few years, the biotech kept the dividends flowing and growing. Gilead initiated its dividend program in 2015 near the peak of its HCV franchise boom. Since then, the company has grown its dividend by an impressive 58%.
I fully expect that Gilead will continue prioritizing its dividend. As the company's pipeline produces new winners, there should be even more earnings to fund higher payouts.
Gilead's dividend currently yields close to 3.7%. My hunch is that the yield itself won't grow significantly over the next few years despite likely dividend increases on the way. I think that Gilead's stock appreciation will offset its dividend increases, keeping the dividend yield at current levels or lower.
Outlook: mainly sunny
My view is that Gilead will be able to deliver solid growth over the next few years. I expect that rising sales for Biktarvy, Descovy, and Yescarta combined with new winners filgotinib, KTE-X19, and remdesivir will more than offset the declines for the company's older HIV drugs. Meanwhile, Gilead's dividend will remain strong and likely continue to increase.
There are risks, though. If Gilead runs into problems securing regulatory approvals for any of its drugs, its growth could be jeopardized. And a lot is riding on success for its clinical programs, particularly the studies evaluating filgotinib in treating other immunology indications.
Still, I think that Gilead is a biotech stock worthy of serious consideration by long-term investors. Although there could be a few clouds on the horizon, the overall outlook for Gilead Sciences is sunny.
