The stock has skyrocketed 345% since March 2011, as the company, which discovers, develops and commercializes new medicines, benefited from low-cost manufacturing and a small sales force. However, the stock has slipped almost 11% over the past year, primarily on concerns about its HCV drug sales and market share, and it has come under additional pressure on discouraging news about a cancer drug.
Is the bull case for Gilead finally over, or is this actually an attractive opportunity to cheaply enter a biotech growth winner?
Gilead is trading at its 52-week lows of about $89 a share. However, considering the stock's spike over the past five years, the pharma player looks like a bargain biotech stock.
By comparison, peers Abbott gained 73.5% and Pfizer rose 46.4%. Meanwhile, Amgen's 170.5%, though impressive, hasn't come close to Gilead's five-year increase.
The recent price correction means that Gilead at 5.6 times enterprise/earnings before interest, taxes, depreciation and amortization is cheaper than its peers Amgen at 10.18, Celgene at 28.17 and Regeneron Pharmaceuticals at 9.3.
With the drop in share price, at 7.2 times forward earnings, Gilead is available at a steep discount to its five-year average of 21 times. In addition, it is also cheaper than all its peers such as Amgen at 11.85 times, Biogen at 12.44 times, Celgene at 13.55 times and Regeneron Pharmaceuticals at 22.28 times.
Gilead has evidently created biotech-driven wealth for shareholders, and with its strong pipeline of HCV and HIV drugs, is well on its way to generating higher returns.
That said, Gilead faces headwinds that can't be ignored. A top scientist who was leading clinical development of Gilead's cancer drug pipeline left the company in February.
What's more, in what Gilead said is an unrelated development, the company this week halted six clinical trials involving its once-promising blood cancer drug Zydelig, after regulators found that it caused adverse side effects.
Regardless of these setbacks, the company has slowly built an impressive pipeline of drugs at various stages that span across liver, cancer, HIV/AIDS, cardiovascular and inflammatory treatments. It has thus shrugged off its image of being a factory that spins out only mega-blockbuster hepatitis C drugs Harvoni and Sovaldi.
Although competition from AbbVie's Viekira Pak and Merck's Zepatier does exist, Gilead offers plenty of other growth opportunities in the biotech sector.