You may know of Gilead Sciences (GILD +0.75%) because of its blockbuster coronavirus treatment Veklury. The product was the first approved for hospitalized patients during the early days of the pandemic. But Gilead also is the world's top seller of HIV drugs and commercializes treatments for cancer and liver disease, too.
Still, Gilead stock hasn't delivered great gains for investors in recent times. In fact, the S&P 500 has outperformed Gilead over the past five years. Does this mean you shouldn't invest in the drugmaker? Let's consider the bear and bull cases before deciding.
The bear case
Gilead has struggled to consistently deliver annual revenue growth ever since its hepatitis C portfolio's revenue reached a peak back in 2015. In fact, Gilead's most recent big revenue driver has been Veklury. For example, the coronavirus treatment helped Gilead increase product sales by 10% back in 2020. Without Veklury, product sales would have slipped.
What's held Gilead back? Like other drugmakers, some of Gilead's older products have lost exclusivity. And that's weighed on revenue. Sales of HIV drugs Truvada and Atripla sank 74% and 58%, respectively, in the full year 2021 -- after losing exclusivity in late 2020. And these products' sales have continued to decline. HIV product sales represent more than 60% of Gilead's total product sales, so, losses in this area are bad news.
Gilead now is facing a drop in Veklury sales as we move toward a post-pandemic situation. Last year, Veklury sales slipped 30%. The product's sales may pick up at certain times during the year when coronavirus cases increase, but it's unlikely we'll see the demand of the early pandemic days.
All of this, along with the fact that Gilead's shares have failed to outperform over time, could make some investors think twice before buying.
The bull case
Though some of Gilead's older drugs aren't contributing as much to earnings as they've done in the past, there are other reasons to be optimistic. Gilead's big HIV blockbuster Biktarvy continues to deliver double-digit sales growth. In the first quarter, Biktarvy sales soared 24% to $2.7 billion. And total HIV product sales also climbed in the double digits.
Importantly, Gilead dominates the worldwide HIV treatment market. Six of the world's bestselling HIV drugs are Gilead products, according to Statista.
Gilead also has introduced new products that should boost growth over time. Late last year, the company won approval for Sunlenca as a twice-yearly treatment for people who are resistant to other HIV drugs. The drug is expected to reach blockbuster status.
Gilead also has a growing oncology portfolio -- and recently won a new approval for Trodelvy in a type of breast cancer. The product already is approved for another type of breast cancer and bladder cancer. Trodelvy sales soared 79% last year to $680 million. This third indication should further broaden the product's revenue potential.
Thanks to the growth in oncology and HIV product sales, last year marked Gilead's best since 2015. That's reason to be positive about growth ahead.
NASDAQ: GILD
Key Data Points
Bull or bear?
Gilead's share performance in recent years may not inspire a lot of excitement. And declines in certain drugs that have lost exclusivity may weigh on investors' minds, too.
But last year's growth and the extension of that in this year's first quarter are positive signs. Gilead's opportunities don't end with patent losses. Blockbusters like Biktarvy continue to deliver, and newer products offer revenue drivers that should keep the growth going.
At the same time, Gilead pledges to continue increasing its dividend and repurchasing shares. This means if you buy Gilead now, you'll benefit from passive income. And the company's strength in HIV and oncology is driving a new phase of revenue growth.
This may lift the stock price, too. That's why I'll go with the bulls on this one and say Gilead is a top stock to buy now.
