In order for 2021 to be successful for Gilead Sciences (GILD +1.88%), the company will need to effectively manage its transition between the products that drove its growth over the past year and the ones that will provide it with continued momentum for the longer term.
The biopharmaceutical company has played a key role during the COVID-19 pandemic, supplying one of the few reasonably effective treatments for people experiencing severe cases of the disease. Management estimates that half of all patients currently hospitalized with COVID-19 in the U.S. are being treated with its antiviral drug Veklury -- more commonly known as remdesivir. Sales of Veklury helped drive Gilead's revenue up by 16% year over year in the first quarter of 2021, while earnings per share grew by 12%. Operating expenses, meanwhile, were flat.
Across the world, Gilead is providing assistance through partnerships to increase manufacturing and distribution of Veklury, including in India, which has been suffering from a massive surge in new COVID-19 cases since early spring. In addition to those coordinated efforts, the company will donate 450,000 vials of the antiviral for use in India's hospitals.
Image Source: Getty Images.
Beyond the pandemic
With COVID-19 vaccines being widely administered across many countries and distribution efforts ramping up worldwide, there is reason to hope that demand for Veklury will diminish in the coming years. But beyond its contributions to addressing the current global health crisis, Gilead continues to succeed in the disease indications it has long focused on, among them hepatitis and cancer.
Sales of its hepatitis B drugs grew by 15% year over year to $214 million during the first quarter, led by Viread, one of the leading treatment options on the market. The company expects revenues from that segment to rise by 17% year over year to $1 billion for all of 2022. According to a forecast from Grandview Research, the market for hepatitis B treatments will grow at a compound annual rate of 2.7% through 2025.
Gilead recently closed its acquisition of German biotech MYR; management has high hopes for that company's drug Hepcludex, a treatment for hepatitis D, a viral infection that causes liver disease. Hepcludex has earned conditional approval from the European Medicines Agency, but given that there are no other approved treatments for hepatitis D, that means Gilead has this particular market to itself for now.
Revenues also grew in Gilead's oncology segment, supported in part by a 36% increase in sales of Yescarta, a treatment for non-Hodgkin lymphoma. The company has also significantly expanded the market potential of cancer drug Trodelvy. The FDA approved that drug for use as a second-line and third-line treatment for metastatic breast cancer and urothelial cancer, which doubles its treatable patient population. Requests for similar label expansions for Trodelvy, which Gilead calls a transformative therapy, are currently being reviewed by regulators in the U.K., Canada, Switzerland, and Australia.
The payoff
Gilead is coming off a solid Q1 in which it beat estimates on revenue and earnings for the third straight quarter, and it seems to be on track for further growth. The stock currently trades at about $70, which is about 15% below its 52-week high. Its average analyst price target is $79, giving it a forecast upside of about 13%. For an even more optimistic view, the top analyst price target is $100, which implies an upside of about 44%.
The company also has a solid dividend history. Management has boosted its payout by 54% over the past five years to $2.84 per share, which at current share prices yields 4.21%. By comparison, the S&P 500 is currently yielding 1.38%, which is below its average of 1.62% over the past year.
With or without the support of significant long-term sales of Veklury, Gilead offers a strong portfolio of treatments that should provide it with many years of profits. And with the stock trading at a reasonable price and offering a high dividend yield, this could be a good time to add Gilead to your portfolio.
