Biotech giant Gilead Sciences (GILD -2.67%) has encountered its share of headwinds in the past two years. For instance, in late 2020 the company lost patent exclusivity in the U.S. for Truvada and Atripla -- both of which are HIV treatments -- leading to lower sales for both drugs.
Also, the drugmaker's much-anticipated rheumatoid arthritis drug filgotinib failed to earn regulatory approval in the U.S. in 2020 because regulators had concerns regarding its safety profile. Those issues, combined with the negative impact of the coronavirus pandemic, have harmed Gilead Sciences' business.
But there is yet hope for the company. Here are two reasons to be enthusiastic regarding the drugmaker's future.
1. A leading COVID-19 therapy
Gilead's Veklury was one of the first treatments for COVID-19 to earn emergency-use authorization -- and then full approval -- in the U.S. This medicine, which is administered by way of intravenous infusion, has played an important role in the fight against this devastating disease. And even as new variants of the coronavirus emerge, Veklury's efficacy persists and it continues to be in use.
The U.S. Food and Drug Administration (FDA) recently restricted use of several COVID-19 therapies because they were unlikely to work against the omicron variant. Veklury wasn't one of those treatments targeted by the agency. According to some reports, Veklury became the medicine that hospitals in the U.S. spent the most money on last year, taking that spot away from AbbVie's Humira. Further, the COVID-19 therapy could retain that number-one spot through mid-2023.
While the past two years haven't been great for Gilead Sciences, they would have been substantially worse, financially speaking, had it not been for the impact of Veklury on its top and bottom lines. And the way it looks, this product will continue to contribute somewhat to the company's results for a bit longer.
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2. Still a major player in the HIV market
Although some of Gilead's products are losing ground, the company remains one of the undisputed leaders in the HIV therapeutic area. Its Biktarvy is the top regimen of its kind in the U.S. with a 42% share of the market. In addition, Gilead's Descovy is the number-one prescribed HIV prep treatment in the U.S. with a 45% slice of that market.
Gilead has continued to innovate in this area. Last year, the drugmaker submitted lenacapavir to regulatory authorities in the U.S. and Europe for review. Management has high hopes for this drug candidate, saying recently that "if successful, lenacapavir will become the first available six-month, long-acting subcutaneous injection for the treatment of HIV." Gilead expects a regulatory decision to come during the first half of the year.
Meanwhile, the company boasts nearly a dozen other HIV-focused programs in addition to many other pipeline candidates in other therapeutics areas.
Is Gilead Sciences a buy?
For 2021, Gilead Sciences recorded revenue of $27.3 billion, 11% higher than the previous year. Veklury played a vital role in this performance with sales of the COVID-19 therapy coming in at $5.6 billion, 98% higher than in 2020.
However, the company expects sales of this medicine to decline in 2022 -- potentially to $2 billion -- as the recent surge in cases due to omicron dies down. As a result, Gilead thinks its total revenue for this year will come in at $23.8 billion to $24.3 billion.
Still, there is reason to be hopeful. As the negative impact of Truvada and Atripla's loss of exclusivity subsides -- and if the company can add lenacapavir to its HIV portfolio -- Gilead's top line should return to growth eventually. Further, Gilead is trading at a price-to-earnings ratio of just 9.7 compared to the industry's average of 11.
So while the company may continue to face headwinds in the near future, investors focused on the long game should find Gilead Sciences a strong biotech stock to consider, especially at current levels.
