Is Gilead a good investment today?

June 21, 2024

We bought shares in Gilead Sciences, Inc (Nasdaq: GILD) yesterday because the pharmaceutical announced a supposed breakthrough in HIV Prevention. The stock price had already climbed 9% by the time we bought in. Today, the stock gained 3%, which is solid for one day and beat the overall market handsomely. By next week, we expect another 5% increase and will be time to exit the short term speculative position.

Gilead Sciences, Inc. announced promising results from a trial study of its HIV-1 capsid inhibitor, lenacapavir. The twice-yearly injectable drug demonstrated 100% efficacy in preventing HIV in about 2,000 women tested in South Africa and Uganda. 

The trial's key efficacy endpoints showed lenacapavir's superiority over once-daily oral Truvada® (emtricitabine and tenofovir disoproxil fumarate) and background HIV incidence. Merdad Parsey, MD, PhD, Chief Medical Officer of Gilead, highlighted the potential of lenacapavir as a significant tool in HIV prevention:

    With zero infections and 100% efficacy, twice-yearly lenacapavir has demonstrated its potential as an important new tool to help prevent HIV infections,” said Merdad Parsey, MD, PhD, Chief Medical Officer, Gilead Sciences. “We look forward to additional results from the ongoing PURPOSE clinical program and continuing toward our goal of helping to end the HIV epidemic for everyone, everywhere.

These are the first data generated from Gilead’s landmark PURPOSE program, which the company describes as the most comprehensive and diverse HIV prevention trial program ever conducted. The PURPOSE program comprises five HIV prevention trials around the world that are focused on innovation in science, trial design, community engagement and health equity.

Summary of Topline PURPOSE 1 Data

PURPOSE 1 Trial Overview:

• Type: Phase 3, double-blind, randomized study
• Objective: Evaluate safety and efficacy of twice-yearly subcutaneous lenacapavir for PrEP and once-daily oral Descovy® (emtricitabine and tenofovir alafenamide)
• Participants: Over 5,300 cisgender women and adolescent girls aged 16-25
• Locations: 25 sites in South Africa and three in Uganda
• Groups: Lenacapavir (2,134 participants), Descovy (2,136 participants), Truvada (1,068 participants)
• Comparison: background HIV and Truvada

Results:

Lenacapavir Group:

• HIV Incidence: 0 cases (0.00 per 100 person-years)
• Comparison: Superior to background HIV (2.41 per 100 person-years) and Truvada (1.69 per 100 person-years), with p<0.0001
• Safety: Well-tolerated, no significant new safety concerns

Descovy Group:

• HIV Incidence: 39 cases (2.02 per 100 person-years), similar to Truvada
• Adherence Issues: Challenges with daily pill adherence
• Safety: Well-tolerated, no new safety concerns

Gilead Sciences, Inc. is a prominent American biopharmaceutical company focused on the discovery, development, and commercialization of innovative therapeutics in areas of unmet medical need. 

Company Overview

• Name: Gilead Sciences, Inc.
• Founded: June 22, 1987
• Founder: Michael L. Riordan, M.D.
• Headquarters: Foster City, California, USA
• CEO: Daniel O’Day 
• Industry: Biotechnology, Pharmaceuticals
• Stock Symbol: GILD (NASDAQ)

Gilead Sciences primarily focuses on antiviral drugs used in the treatment of:

• HIV/AIDS
• Hepatitis B and C
• Influenza
• COVID-19
• Oncology

Notable Products

HIV/AIDS Treatments:

• Truvada (emtricitabine/tenofovir disoproxil fumarate): A combination antiretroviral drug used for both treatment and pre-exposure prophylaxis (PrEP).
• Biktarvy (bictegravir/emtricitabine/tenofovir alafenamide): A single-tablet regimen for HIV treatment.
• Genvoya (elvitegravir/cobicistat/emtricitabine/tenofovir alafenamide): A single-tablet regimen for HIV treatment.

Hepatitis Treatments:

• Harvoni (ledipasvir/sofosbuvir): An oral treatment for chronic hepatitis C.
• Epclusa (sofosbuvir/velpatasvir): A combination drug for the treatment of all genotypes of hepatitis C.

COVID-19 Treatment:

• Veklury (remdesivir): An antiviral drug approved for the treatment of COVID-19.

Oncology:

• Yescarta (axicabtagene ciloleucel): A CAR T-cell therapy for certain types of large B-cell lymphoma.

Financial Performance

• Gilead Sciences has been a consistently strong performer in the biotechnology sector, with substantial revenues driven by its blockbuster HIV and hepatitis C drugs. The company invests heavily in research and development to sustain its pipeline of innovative therapeutics.

Challenges and Criticisms

• Pricing Controversies: Gilead has faced criticism over the pricing of its drugs, particularly its hepatitis C treatments, which have been seen as prohibitively expensive by some healthcare systems.
• Patent Disputes: The company has been involved in numerous patent disputes and litigation related to its drug formulations and generic competition.

Investment Risk and Short term Outlook

• Gilead may be significantly overvalued already. Trading at $70 a share, with a market capitalization of $85 billion, GILD is already trading at a super high price to earnings (P/E) ratio of 190. The average P/E ratio for the pharmaceutical industry is 40. 
• Gilead will announce the results of the next round of studies later in 2024 or in 2025. Market appetite and tolerance for anything short of extraordinary results may be very limited. The stock price can be expected to fall significantly if the results are not perfect. Perfect results may not lead to significant gains because the market seems to have priced perfect results already in the current valuation. 
• A temporary 5% increase next week may result as late comers and institutional investors ponder the HIV report news. Creatix target rapid sell price is set at $73. 

www.creatix.one