Biopharmaceutical giant Gilead Sciences Inc. (GILD) finds, develops, and commercializes medicines for unmet medical needs in the United States, Europe, and other countries. The stock has gained 12.1% over the past six months and 3.5% over the past month to close its last trading session at $65.
The company reported impressive sales in the last reported quarter. GILD’s total product sales, excluding Veklury, increased 7% year-over-year to $5.69 billion for the second quarter ended June 30, 2022. Furthermore, its HIV product sales increased by 7% from the prior-year quarter to $4.23 billion. Oncology sales for the company reached $527 million, representing a year-over-year increase of 71%.
Last month, GILD and MiroBio, a privately held biotechnology company based in the U.K. focused on restoring immune balance with agonists targeting immune inhibitory receptors, announced a definitive agreement under which Gilead will acquire MiroBio for approximately $405 million in cash, subject to customary adjustments. Through the acquisition, Gilead will have access to MiroBio's exclusive discovery platform and the complete line of immune inhibitory receptor agonists.
Here's what could shape GILD's performance in the near term:
Latest Developments
This week, GILD announced that the World Health Organization had expanded its recommended guidelines for the use of its COVID-19 treatment Veklury. The company stated that WHO updated its guidelines to recommend the drug to treat patients with severe COVID, an expansion from "those with non-severe COVID-19 at the highest risk of hospitalization."
Last month, GILD reported that the European Commission (EC) approved Sunlenca (lenacapavir) injection and tablets for the treatment of HIV infection, in combination with other antiretroviral(s), in adults with multi-drug resistant HIV infection for whom it is otherwise impossible to develop a suppressive antiviral regimen.
With a new treatment option available every six months for HIV patients whose virus no longer effectively responds to their current therapy, lenacapavir is a first-in-class capsid inhibitor with a multi-stage mechanism of action and no known cross-resistance to other classes of medications.
Strong Profitability
GILD's trailing-12-months gross profit margin of 79.5% is 45.9% higher than the industry average of 54.5%. Also, its ROC, ROE, and ROA of 14.4%, 20.7%, and 6.6% compare to the negative industry averages of 21.4%, 38.6%, and 29.7%. Furthermore, its EBITDA margin of 48% is significantly higher than the industry average of 3.9%.
Discounted Valuation
In terms of forward Non-GAAP P/E, the stock is currently trading at 9.83x, 46.2% lower than the industry average of 18.26x. Also, its forward EV/Sales of 3.98x is 4.9% lower than the industry average of 4.19x. Moreover, GILD's forward Price/Sales of 3.42x is 30.6% lower than the industry average of 4.67x.
Consensus Rating and Price Target Indicate Potential Upside
Of the 15 Wall Street analysts that rated GILD, five rated it Buy, and ten rated it Hold. The 12-month median price target of $72.43 indicates an 11.4% potential upside. The price targets range from a low of $72.43 to a high of $84.00.
POWR Ratings Reflect Solid Prospects
GILD has an overall grade of B, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. GILD has an A grade for Value and a B for Quality. The company's lower-than-industry valuation multiples are in sync with the Value grade. GILD's solid profitability is consistent with the Quality grade.
Of the 398 stocks in the F-rated Biotech industry, GILD is ranked #10.
Beyond what I stated above, we have graded GILD for Sentiment, Stability, Growth, and Momentum. Get all GILD ratings here.
Bottom Line
GILD demonstrated strong financial performance in the last reported quarter and is on track to deliver solid growth in the coming months based on its impressive product portfolio. Additionally, given the positive analyst sentiment and the firm's fundamental strength, the stock may see a significant upside in the near term. So, it could be wise to invest in the stock now.
How Does Gilead Sciences Inc. (GILD) Stack Up Against its Peers?
GILD has an overall POWR Rating of B, which equates to a Buy rating. Check out these other stocks within the same industry with A (Strong Buy) ratings: Vertex Pharmaceuticals Inc. (VRTX), Biogen Inc. (BIIB), and United Therapeutics Corporation (UTHR).
GILD shares were trading at $65.15 per share on Friday morning, up $0.15 (+0.23%). Year-to-date, GILD has declined -6.95%, versus a -18.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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