Which biotech stock deserves an award as the most improved? I think Gilead Sciences (GILD 2.75%) should be a top contender.

In 2018, Gilead's shares declined by 9%. The following year, the stock eked out a 4% gain. Gilead delivered a double-digit return in 2020 with shares rising nearly 12%. Last year, the stock soared by almost 25%.

And Gilead is still on a roll. The biotech stock is currently up more than 20% year to date. With a little luck, it just might surpass its lofty performance achieved in 2021. But is Gilead Sciences stock still a buy after soaring in 2022?

Behind Gilead's success

Gilead actually wasn't making investors all that happy throughout much of this year. As recently as early October, the stock was down by double-digits year to date. How did the big biotech turn lemons into lemonade? Gilead did it the way drugmakers often achieve success -- by notching key regulatory wins and giving investors reasons to be optimistic about the future.

On Oct. 11, 2022, Gilead announced that the U.S. Food and Drug Administration (FDA) had granted priority review to the regulatory filing of Trodelvy in treating a specific type of breast cancer. This shortened the review period, with a PDUFA date set for February 2023. 

Less than one week later, Gilead had more good news from the other side of the Atlantic. On Oct. 17, the company announced that the European Commission approved Yescarta as a second-line treatment for diffuse large B-cell lymphoma. The cell therapy became the first treatment in three decades that was found to improve upon the standard of care for the indication.

In early November, the FDA approved Gilead's Vemlidy as a treatment of chronic hepatitis B virus infection in children 12 years or older. Later in the month, Biktarvy picked up an expanded European label in treating HIV in kids at least two years old. 

Along the way, Gilead blew past Wall Street's Q3 earnings expectations. The company also raised its full-year 2022 revenue outlook by $1.3 billion at the midpoint of its guidance range. It increased the projected earnings for 2022 by more than 11% as well.

Opportunities and challenges

Gilead has high hopes for Sunlenca (lenacapavir), a long-acting HIV therapy that won European approval in August 2022. On the company's Q3 conference call, CEO Dan O'Day called the drug "a foundational asset for the future of our HIV franchise." An FDA approval decision on lenacapavir is expected this month.

In the meantime, Gilead's HIV franchise is anchored by Biktarvy. Sales for the oral HIV therapy continue to grow robustly.

The company's expansion into oncology is also bearing fruit. Gilead's cell therapies Tecartus and Yescarta are picking up momentum. Trodelvy could be on the way to raking in peak annual sales of between $2 billion and $3 billion. 

But there are several major challenges for Gilead. The loss of exclusivity for several older HIV drugs continues to weigh on the biotech's top-line growth. Other key HIV drugs face patent expiration in the coming years. For example, U.S. patents for Descovy and Odefsey expire in 2025. Despite the increased sales for Gilead's cancer therapies, HIV still generates nearly 64% of total revenue. 

There's also uncertainty about COVID-19 therapy Veklury. This is reflected by the fact that Gilead's management team likes to talk about revenue growth excluding Veklury. The drug made up 13% of the company's total revenue in Q3. 

Still a buy?

I agree with my colleague Prosper Junior Bakiny that Gilead Sciences stock could continue to outperform in 2023 for two main reasons. The company's HIV franchise should remain a juggernaut. Gilead's diversification into oncology should also continue to pay off.

But I'd also add two other factors that should help drive the stock even higher. Gilead's valuation is still quite attractive even after the stock's big gain this year. Shares currently trade at only 13 times expected earnings. Also, the company's dividend should be appealing to income investors with a yield of nearly 3.3%.

The potential U.S. approval of lenacapavir is right around the corner and could provide a nice near-term catalyst. I suspect that Gilead will further secure its claim as the most improved biotech stock on the market as the new year approaches.