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Is Gilead Sciences Stock a Buy After 2 Recent Wins?

By Keith Speights and Brian Orelli, PhD - Mar 17, 2021 at 5:04AM

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The biotech's good news might not be good enough news.

Gilead Sciences (GILD 0.89%) hasn't generated excitement among investors in quite a while. However, the big biotech reported two new developments recently that at least hold the potential to boost its fortunes. In this Motley Fool Live video, recorded on March 10, Fool.com contributors Keith Speights and Brian Orelli discuss whether or not Gilead stock is a buy after its two wins.

Keith Speights: All right, so Brian, let's switch to a non-COVID-19 subject. This is a company that I know you have followed for years, I've followed for years. Gilead Sciences, the ticker there is GILD.

Gilead has reported two pretty big developments over the last week. On Friday of last week, Gilead won FDA approval for Yescarta in treating follicular lymphoma. Yescarta has already won previous approvals, so this is a new indication. Then on Saturday, the company reported some pretty impressive results for its blockbuster HIV drug, Biktarvy.

Brian, do you think either of these stories change the investing proposition for Gilead. Gilead's kind of struggled for a while now. Is the stock a buy because of either of these stories?

Brian Orelli: No, neither one really gets me super excited. Yescarta's a CAR-T product. It has to be individually manufactured for each individual patient. The high manufacturing costs and limited capacity make it so it's probably not going to move the revenue needle that much for Gilead.

Then the Biktarvy results were from a long-term extension study. The drug is already approved. Long-term data could give doctors some confidence but, I mean, I think that probably they're using, they were willing to use it based on shorter-term data. I think that that's, I don't know if there's going to be how many more doctors that are going to prescribe it just because it's shown to work long term as well as in the short term.

Gilead remains super cheap, 3.3 times times trailing-12-month revenue, nine times forward earnings estimates. Now, but it really needs a growth driver and I don't see either one of these to be the growth driver.

Speights: I would agree with you and Gilead certainly needs a growth driver. I've been a shareholder in the past. I did sell my stock a while back, but I had hoped that Gilead's entrance into the immunology space might be that spark that the company needed, and then things just fell apart with filgotinib. And that ended up not being the growth driver that a lot of investors had hoped. Brian, do you see a potential growth driver on the horizon for Gilead?

Orelli: I think it's cancer. They are, they're getting big into cancer. The pipeline's still pretty relatively young. But I think that's going to be the growth driver, but it may take a few years to really pan out.

I thought NASH was going to be the growth driver, but then they had like three or four NASH drugs and they tried to combine them, but that hasn't panned out. I think it's probably going to be cancer, and cancer's probably a higher likelihood of success than NASH which has really been difficult for companies to tackle.

Speights: Yeah, and of course, Gilead's CEO, Dan O'Day has an oncology background and has led the company to make several acquisitions in the oncology space. The company still has a pretty hefty cash stockpile, I wouldn't be surprised to see more acquisitions along that front. I think you're probably right that Gilead's best shot is in cancer. Of course, there's still the juggernaut in HIV, but the problem there is just how much growth they'll get from HIV over the next five to 10 years.

Orelli: It's stable. But it's not really -- it's hard for them to, there's not much growth, and it's got them a large majority of the market and they are going to get competition from long-lasting drugs and other drugmakers that they're going to try to compete with them. I think they're ebb and flow a little bit. I'm not worried about the HIV franchise, but I don't think it's really going to help them that much.

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