Biotech company Gilead Sciences (GILD) is trying to corral Covid-19 with an experimental coronavirus treatment — an effort that has stoked renewed hopes for GILD stock.
The biotech company is advancing a former Ebola virus treatment, remdesivir, in clinical studies of patients with Covid-19, the disease caused by a new form of coronavirus discovered last year. But shares of GILD stock have been volatile amid its coronavirus treatment efforts.
Gilead is also trying to stake its claim in HIV treatments. It's facing off against an outlet mostly owned by GlaxoSmithKline (GSK) called ViiV Healthcare. Biotech company Gilead is also pushing into cancer drugs after wrapping its takeover of Forty Seven.
All in all, should investors consider buying GILD stock right now?
A Fundamental Look At GILD Stock
Gilead used to be a powerhouse in treating hepatitis C.
The drug called Sovaldi gained Food and Drug Administration approval in 2013. The following year, it raked in $10.3 billion in sales. Gilead also had success with drugs dubbed Harvoni and Epclusa. About 95% of hepatitis C patients can now be cured with treatment.
In 2016, sales in Gilead's formerly bullish hepatitis C unit tumbled 23% as the number of cures increased. That trend has continued ever since despite the addition of a new hepatitis C drug known as Vosevi.
In the wake of that hepatitis C drug sales cliff, earnings have painted a dim picture. Adjusted earnings per share have declined for 14 of the past 15 quarters. In the fourth quarter, adjusted Gilead income fell 10% to $1.30 per share. That widely missed estimates for $1.58 a share.
Sales inched up 1% to $5.88 billion. That topped expectations for $5.73 billion. But it also extended a recent trend of flat or single-digit percentage increases in sales growth. As a result, GILD stock dipped on Feb. 5, the day following its fourth-quarter earnings report.
Analysts polled by Zacks Investment Research expect these trends to continue in the first quarter. On average, they expect adjusted Gilead earnings of $1.37 per share on $5.37 billion in sales. Earnings would slide 22.2% and sales would rise 1.6%.
Looking For Better Growth
This volatile trend doesn't put GILD stock in line with CAN SLIM rules for investing. Growth stock investors should look for stocks with 20%-25% or better earnings growth in the most recent quarter.
Notably, Gilead's after-tax margin slid in the fourth quarter to 28.1%. The biotech company's after-tax margin has now decelerated for five of the past six quarters. Strong stocks show a trend of margin acceleration.
Gilead's fourth-quarter after-tax margin lagged fellow large-cap biotech company Amgen (AMGN), which had a margin of 35.1%. Still, Amgen's margins have decelerated for two straight quarters. But top-rated biotech Vertex Pharmaceuticals (VRTX) was in the middle with a margin of 31.4%.
Vertex stock has a perfect Composite Rating of 99, meaning it ranks in the top 1% of all stocks in terms of key growth metrics. GILD stock has a Composite Rating of 90. The CR is a 1-99 measure of a stock's key growth metrics, with 99 the best.
Annual Metrics: What Does 2019 Tell Us?
In 2019, Gilead earnings were $6.63 per share, minus certain items. That edged down a fraction on a year-over-year basis. Operating cash flow came out to $6.69 per share — less than 1% ahead of profit. The fastest-growing companies have operating cash flow at least 20% above earnings per share.
But sales inched up 1% to $22.45 billion. That was the first time sales rose since 2015.
Less bullishly, Gilead's annual pretax margin hit 47.6% — its lowest in six years. Pretax margin also slowed for the fourth year running. When looking for strong stocks, it's smart to consider those with accelerating pretax margins.
In 2020, analysts expect Gilead to earn $6.42 per share on $22.34 billion in sales. Earnings would slide 3.2% and sales would dip a fraction.
GILD Stock Technical Analysis: No Chart Pattern
Shares of GILD stock aren't currently forming a definite chart pattern.
As of midday trading on April 20, GILD stock was above both its 50-day moving average and 200-day line. Gilead's relative strength line has mostly declined since 2014 — meaning it has lagged the S&P 500 during that period. But that trend appears to be reversing now.
Gilead has an RS Rating of 96, putting its 12-month performance in the top 4% of all stocks. Leading stocks tend to have RS Ratings of 80 or above.
Gilead stock ranks No. 27 out of nearly 600 publicly traded biotech stocks by Composite Rating in IBD's Stock Checkup. Keep tabs on those scores by visiting IBD Digital.
Which Mutual Funds Are Investing In Gilead?
Fidelity Contrafund remains a long-term key investor in GILD stock. The largest actively managed mutual fund in the world increased its holding in GILD stock in December and March.
Further, more funds are either adding GILD stock or increasing their positions than cutting their holdings, as of late March. Several of those adding funds have A ratings.
GILD Stock News: Coronavirus Treatment In Testing
Earlier this month, Gilead said it's creating a stockpile of experimental coronavirus treatment, remdesivir. The biotech company plans to have more than 500,000 courses of remdesivir by October and more than 1 million by year's end.
Further, Gilead says it plans to donate its existing supply of remdesivir for compassionate use, expanded access or clinical studies. Results from compassionate-use of the drug have been promising as well. These programs allow access to a drug for patients who can't enroll in a study.
In early April, Gilead said 53 patients who received remdesivir under compassionate-use programs showed a clinical improvement of 84% after 28 days of follow-up. Across all patients, 68% showed improvement in oxygen support class over a median follow-up of 18 days.
The European Medicines Agency recommended compassionate use of remdesivir based on laboratory tests. Although remdesivir isn't approved anywhere, this will allow patients in some European countries to access the experimental coronavirus treatment in serious cases.
Will GILD Stock Fly On Coronavirus Treatment?
In mid-March, Gilead said it had become swamped with compassionate-use requests for remdesivir in U.S. patients with Covid-19. So, the biotech company suspended that program and, instead, put together an expanded-use program.
Further, Chief Executive Daniel O'Day said in late March the biotech company expects to have initial results from clinical tests of its coronavirus treatment within "the coming weeks."
On March 13, GILD stock popped on the test results for its coronavirus treatment in patients sickened on the Diamond Princess cruise ship in Japan. A total of 17 passengers received intravenous remdesivir once a day for 10 days to treat it.
By the end of the test, all were still alive and more than half recovered. That sent GILD stock up 3.2%.
Earlier in the month, analysts suggested the biotech company could have the results of studies of its coronavirus treatment in March or April. The suggestions prodded GILD stock to pop 1.9% and 5.4% on two separate days. In fact, GILD stock hit a two-year high on March 6.
Shares also popped on March 2 after the biotech company announced its $4.9 billion plan to buy Forty Seven, a cancer-focused player. Forty Seven is currently testing an immuno-oncology drug in blood cancers and solid tumors.
Acquisitions Bolster Gilead's Pipeline
The addition of Forty Seven wrapped on April 7, and helps bolster Gilead's pipeline of oncology drugs. In 2017, Gilead spent $11.9 billion to acquire Kite Pharma, the maker of Yescarta, a CAR-T drug. CAR-T drugs also target cancer by training the immune system.
In late February, GILD stock rose nearly 5% after a World Health Organization representative said the biotech company's experimental coronavirus treatment, remdesivir, might be the best candidate for treating Covid-19.
Also that day, documents showed China's National Medical Products Administration had accepted the application for Yescarta, in treating a form of blood cancer known as large B-cell lymphoma. The application was filed by a joint venture known as Fosun Kite Biotechnology.
In early February, GILD stock rose 5% in a single day after the biotech company said it would send remdesivir to China to test it as a coronavirus treatment. The drug previously showed promise in a 35-year-old U.S. patient with a new form of coronavirus.
Biotech Company Announces Partnerships
The FDA granted a Gilead drug a speedier priority review in the treatment of mantle cell lymphoma, a type of blood cancer. That drug, KTE-X19, is being developed by Gilead's Kite.
In December, Gilead and Japan-based pharma Eisai entered into a collaboration agreement for the co-promotion of a drug called filgotinib as a rheumatoid arthritis treatment, pending approval. Gilead announced it submitted an application for filgotinib approval to U.S. regulators.
The biotech company also announced China approved chronic hepatitis C treatment Vosevi.
In November, Gilead said a pooled analysis showed strong results for filgotinib in rheumatoid arthritis treatment. Filgotinib is being developed with Galapagos (GLPG). The two companies announced a collaboration deal in August 2019.
Under terms of that deal, Gilead paid Galapagos $3.95 billion up front. Gilead also made a $1.1 billion equity investment in the other biotech company. The deal was initially announced July 14, 2019. Gilead will have access to six drugs in clinical studies and 20 preclinical medicines.
Other Gilead Stock News
Early last year, Gilead said its nonalcoholic steatohepatitis drug, selonsertib, failed to improve fibrosis — a key goal of the studies. Gilead tested selonsertib in patients with stage 3-4 fibrosis. Fibrosis is a type of liver damage. Stage 4 is the worst level.
Meanwhile, rival Intercept Pharmaceuticals (ICPT) said its potential nonalcoholic steatohepatitis drug, Ocaliva, hit its key goal in a study. Ocaliva improved damage in patients with stage 3 fibrosis.
But Gilead isn't backing down. In April 2019, Gilead announced a collaboration with privately held Insitro to investigate potential treatments for nonalcoholic steatohepatitis. Insitro uses machine learning to build models to understand diseases.
Importantly, Gilead named a new chief executive in December 2018. Former Roche (RHHBY) executive Daniel O'Day took the helm at Gilead on March 1, 2019, replacing former Gilead CEO John Milligan.
So, Is Gilead Stock A Buy?
Based on CAN SLIM investing principles, the short answer is no. Gilead stock is not a buy right now based on the metrics that other big winning stocks showed at the beginning of major price runs.
Investors should look for stocks that beat expectations while growing sales and earnings.
Further, Gilead stock isn't currently forming a definitive chart pattern. It's best to buy stocks that have recently surpassed a buy point and are within the 5% chase zone. (Related: See other stocks near a buy zone.)
Gilead also looks poised to report declining earnings and sales growth in the first quarter. But the sales growth forecast is not be stout enough to fall in line with CAN SLIM rules of investing. It will be key to watch Gilead's efforts to advance a coronavirus treatment in the coming months.
