Gilead Sciences (NASDAQ:GILD) is one of the year's biggest stocks, up 17%, while the S&P 500 is down 21% over the same period. And the company may have given investors reason to remain optimistic about the stock. Health officials have given the go-ahead for another HIV treatment that promises to improve lives and generate billions in corporate revenue. Is it time to stockpile Gilead?
FDA approved lenacapavir
On December 22, Gilead Sciences issued a press release announcing that the Food and Drug Administration (FDA) had approved an HIV treatment, lenacapavir, to be marketed as Sunlenca. This treatment is approved for people with multidrug-resistant HIV. The six-monthly injection will give many HIV patients a longer option than the daily pill they are currently on. Importantly, it is not approved for everyone with HIV, only for those "who cannot be successfully treated with other available therapies because of resistance, intolerance or safety concerns."
For investors, this is as important a win as success for Gilead. Analysts estimate that lenacapavir could generate $1.5 billion in revenue at its peak. This will represent approximately 5.5% of the $27 trillion in product sales reported by Gilead last year.
In terms of value for money, it may not be a game changer, but it's still a significant accomplishment for Gilead. CEO Daniel O'Day said, “Gilead scientists have developed the unique and powerful antiretroviral drug Sunlenca with flexible dosing options. Our goal is to provide multiple long-term care options.
Gilead is actually positioning itself to be in the best position to capitalize on the growing need for HIV care. Fortune Business Insights estimates that the global HIV drug market will be valued at over $45 trillion by 2028, and a compound annual growth rate of 5.9% until then.
Gilead could use a growth catalyst
One of Gilead's recent challenges has been finding ways to ensure sustainable growth, and Sunlenca can help. Over the past three quarters, Gilead's revenue excluding the COVID-19 drug Vecluri was $16.7 billion, up just 7% year-over-year. And the growth rate of its largest segment, HIV, is even lower, at just 5%. Therefore, Sunlenca's agreement gives investors an opportunity to bounce back and be able to generate even stronger growth in the future.
The stock is currently trading at multiples of 13 (less than the health average of 17), indicating that investors are a little wary of the company and unsure of its upside potential. Gilead stock has yet to receive FDA approval, but the stock likely has lost money in recent months, thanks in part to strong earnings reports and generally favorable market growth prospects for the stock. While this is a big win for the company, the backing may not be enough (financially) to push the stock higher than before.
Is Gilead Sciences a Share Buyback?
Gilead Sciences has a strong HIV business that recently got another opportunity with support from Sunlenca. Despite increasing value, Gilead shares are not overvalued and are still a bargain. And with a dividend yield of 3.5%, there's even an added incentive to buy and own medical stocks because they are an investment that can be a good source of regular cash flow for your portfolio.
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David Jagielski was not interested in this action. Motley Fool has and recommends positions at Gilead Sciences. Motley Fool has a disclosure policy.