Gilead Sciences Showing Strength

By Brian Wilson, Contributor

Monday, 20 August 2012 02:32

icon_newsnotes Gilead Sciences (NASDAQ: GILD) has been breaking new highs on the stellar prospects of their latest HIV pill, Truvada, which received FDA approval as an AIDS prevention drug approximately one month ago.

Truvada was formerly used exclusively as a treatment for HIV/AIDS, which means that the drug's target market can now be expanded far beyond it's current limitations, which is exciting investors about its sales figure potential in future quarters.

Gilead has 14 products available on the market, but the company as a whole relies quite heavily on HIV treatment. The other name-brand powerhouse in Gilead's pipeline is Atripla, which has a combination of the three main HIV medications in a single pill. This includes the compounds SUSTIVA, EMTRIVA, and VIREAD. It is a relatively simple idea, but the simplicity in a once-daily pill for AIDS patients has led the company to incredible success.

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Sales growth in the last year, according to the second quarter results of this year, were quite strong and showed that the company has some momentum behind it. Since the second quarter of 2011, sales growth has increase by approximately 14% with particularly strong figures in the United States. The balance sheet was also deleveraged through $350 million of debt repayments. Overall, the company is looking in good shape and the analysts are seeing this as a good sign. New models incorporating sales of Truvada in the AIDS prevention market are generally making shares of GILD look undervalued, even after their recent run.

The company has already moved up approximately 42% since the start of the year, and GILD seems to have strong momentum buying that could keep contrarians (bears) away until the influx of investors chasing analyst ratings has been exhausted. We also have one major impending catalyst to look forward to, as pointed out by the BioMedReports' FDA calendar, on August 27th. The new HIV drug known as "Quad" is virtually guaranteed an approval on the heels of a FDA advisory panel's 13 to 1 vote in favor of a "yes". The market seems to anticipate a Atripla-like lifespan for Quad too, although it may cannibalize some of Gilead's product line since it contains 2 Gilead products already (Emtriva and Viread).

Traders may find profits in riding the excitement over Gilead's prospects in HIV/AIDS treatment and prevention, or on the FDA decision that is likely to come on 8/27, but investors should look to the company's pipeline if they are looking for potential value. GS-1101, for instance, is a phase III P13K inhibitor that treats Chronic Lymphocytic Leukemia. It will take a long time for Gilead to file GS-1101's NDA, but the high expected revenues from their HIV/AIDS drugs will be more than enough to sustain the development of next generation drugs in other fields.

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