Does This Drug Maker For Hepatitis C Have More Upside?

When a drug maker reports curing 100 percent of study patients enrolled in a study, it is a reason for its stock to rally. Gilead Sciences (GILD) reported that all of its patients were cured from Hepatitis C after taking two Gilead drugs and a generically available pill.

Gilead is trading at a new high:

Anyone who missed the run-up and would want to participate in its rise should ask a few questions. First, investors need to scrutinize the study and evaluate the likelihood of the product being launched to market. Second, valuation still matters. Now that more enthusiasm is priced in the stock, shares could now be too expensive.

Using Kapitall Number Cruncher, the tool reports that Gilead has a Price of Profit of 19, a market capitalization of $57.6 billion, and a price to book ratio of 6.5x. Plotting Gilead in Kapitall’s “Compare Multiple Companies” launch tool, Gilead may be seen as having the second-largest market cap compared to its peers. Amgen and Abbott, who is Gilead’s closest competitor, has a bigger market cap:

Caution:

Gilead’s Hepatitis study had just 25 patients enrolled, which is statistically insignificant. The study also looked at data only four weeks after the treatment was completed. Regulators usually wait 12 or 24 weeks after the treatment to confirm a patient is cured.

Competition:

Abbott has a cocktail of a combination of 5 drugs for hepatitis treatment. Vertex (VRTX) and Merck (MRK) have treatments that have a cure rate of up to 75%, but the failure rate is 25%.

Brystol-Myers (BMY) had a drug in the works during the summer, but it failed because of safety issues. Another hepatitis drug was reportedly curing 94% of patients 12 weeks after they were treated. This is arguably a better statistic than that of Gilead’s study.

Final Words:

If Gilead confirms its solid results for Hepatitis C, the company’s shares will soar even higher. Investors who are cautious might want to wait for more data.

1 2 Next › Last »