Biopharmaceutical company Gilead Sciences (GILD) has recently garnered significant attention from Wall Street, with analysts setting ambitious price targets, including a notable $105 target. This optimism is fueled by Gilead’s impressive first-quarter 2024 financial results, which saw a 5% increase in total revenue to $6.7 billion, driven by strong performances in HIV, oncology, and liver disease segments. Additionally, groundbreaking clinical trial results for its HIV prevention drug lenacapavir and the potential FDA approval of seladelpar for biliary cholangitis underscore Gilead’s robust pipeline and growth potential.
Given these factors, I am bullish and confident in Gilead’s ability to deliver sustained growth and innovation.
Financial Performance So Far
Gilead Sciences is a biopharmaceutical company renowned for its innovative treatments in areas such as HIV/AIDS, liver diseases, hematology, oncology, and inflammation. The company’s recent financial performance shows it navigating both challenges and opportunities in the dynamic biopharmaceutical landscape.
In the first quarter of 2024, Gilead reported total revenue of $6.7 billion, marking a 5% increase year-over-year. This growth was primarily driven by strong performances in key therapeutic areas, with HIV product sales rising 4%, Oncology sales surging 18%, and Liver Disease product sales growing by 9%.
The company’s flagship HIV treatment, Biktarvy, continues to be a standout performer, with sales jumping 10% to reach $2.9 billion. This robust growth in Biktarvy sales underscores Gilead’s continued dominance in the HIV market, maintaining over 40% market share in the U.S. for PrEP (pre-exposure prophylaxis).
However, Gilead’s financial picture has its complexities. The company reported a net loss for Q1 2024, primarily due to a substantial $3.9 billion charge related to the acquisition of CymaBay Therapeutics. While this acquisition is expected to bolster Gilead’s pipeline in the long term, particularly in liver diseases, it has had a significant short-term impact on the company’s bottom line.
The market’s reaction to Gilead’s financial performance has been mixed. While the stock has surged in the past two months, it’s important to note that this comes after a notable year-to-date decline, underperforming the broader market.
This underperformance highlights the challenges Gilead has faced but also potentially presents an opportunity for value investors who believe in the company’s long-term potential.
When looking at Gilead’s valuation metrics, the company’s forward non-GAAP P/E ratio stands at 19.8x, which is lower than the healthcare sector median of 20.4x. This suggests that Gilead may be undervalued relative to its peers. Additionally, Gilead’s price-to-sales (P/S) ratio is 3.4x, below the sector average of 3.8x.
These valuation metrics indicate that Gilead is trading at a discount compared to the broader healthcare market. This makes it attractive for value-oriented investors who believe in the company’s ability to overcome its recent challenges and deliver long-term growth.
Gilead’s Recent Developments
Gilead’s HIV prevention drug, lenacapavir, is showing incredible promise. With 100% efficacy in its Phase 3 trial, I am talking about a potential change that could replace daily pills with just two shots a year. That’s the kind of innovation that could really transform HIV prevention. Gilead is looking at a possible market launch in late 2025.
And let’s not forget about seladelpar for primary biliary cholangitis (PBC). The results from Gilead’s ASSURE study are impressive, with 70% of patients hitting that crucial composite endpoint at 12 months. Even more impressive, 37% achieved ALP normalization. These are the types of results that could really make a difference for PBC patients. It’s not just about improving liver function markers but also significantly reducing pruritus, a major quality-of-life issue for PBC patients.
The FDA has this on priority review, with a decision expected in August 2024. If approved, this could be a significant addition to Gilead’s portfolio. Johanna Mercier, Gilead’s CCO, mentioned that while seladelpar’s contribution might be modest in 2024, it’s expected to become more meaningful in 2025 and beyond.
Financial Projections and Analyst Expectations
Analysts at Raymond James have projected that the combined annual sales of lenacapavir and seladelpar could reach a whopping $3.7 billion by 2030. That’s a significant figure that underscores the potential impact these two drugs could have on Gilead’s bottom line. To put this in perspective, Gilead’s total product sales for the first quarter of 2024 were $6.7 billion, so we’re looking at a potential addition that could represent over half of a typical quarter’s current sales.
RBC Capital Markets analyst Brian Abrahams estimates that lenacapavir alone could generate peak sales of almost $2 billion, leaving a substantial portion of the $3.7 billion projection for seladelpar.
Adding to all of these projections, the company is expected to report earnings per share (EPS) of $1.60 for Q2 2024, representing a 17.9% increase from the same quarter last year. For the full fiscal year 2024, analysts project an EPS of $3.83, which is actually a 14.90% decrease from the $4.50 reported in Fiscal 2023. However, there’s an optimistic outlook for 2025, with EPS expected to rebound significantly, increasing by 90.65% year-over-year to $7.30.
Is Gilead Sciences Stock a Buy, According to Analysts?
According to analyst ratings, Gilead Sciences (GILD) stock has a Moderate Buy consensus rating. Out of 24 analysts covering the stock, 12 rate it a Buy and 12 a Hold. The average GILD stock price target is $77.67, which implies upside potential of approximately 9.33%.
Notably, the highest price target set by analysts is $105, indicating a potential upside of around 38%, which reflects a particularly optimistic outlook on Gilead’s future performance.
The Takeaway
Gilead Sciences is at a pivotal point, balancing opportunities and challenges. Lenacapavir and seladelpar are projected to generate $3.7 billion in sales by 2030, but the company faces market underperformance and pipeline setbacks. Despite these hurdles, I remain cautiously bullish on GILD stock. Yes, we might see some short-term volatility – that’s just the nature of biotech. But if you’ve got the stomach for it, Gilead’s long-term potential is seriously impressive. It’s not just about the numbers; it’s about a company pushing the boundaries of what’s possible in medicine.
