They all questioned the potential for a repeat performance for biotech in 2014. After all, it had been the market’s best-performing sector for three years running.
I stated in my column in early 2014 that biotech was still good, if investors were in the right companies. And specifically, I called out biotech large cap Gilead Sciences, Inc. (NASDAQ:GILD) as a good pick.
I’m sure you’ve heard of the biotech large cap, Gilead even if you missed my article. The company is no stranger to the limelight these days given the buzz surrounding its $1,000 hepatitis-C “miracle cure” pill Sovaldi.
Gilead’s Sovaldi launched in December 2013 and hit $139.4 million in sales in Q4 alone. Some of this revenue was due to stocking up, but regardless, the drug was off to a great start.
It is almost unfathomable…but just two quarters later sales of Gilead’s Sovaldi sales are already at $3.5 billion per quarter.
The large cap delivered blowout results in large part due to sales of the blockbuster drug. It appears that $1,000 per pill is still a good deal given all the variables involved in treating hepatitis-C, let alone curing it – which Sovaldi appears to do.
Second quarter EPS were up by 372% to $2.35, versus consensus of just $1.72, and revenue was up by 136% to $6.5 billion, versus consensus of just $5.7 billion.
Those are massive numbers. And like I said, the results are in large part due to surging sales of Sovaldi, which generated $3.5 billion in sales.
Step back for a second and look at Gilead’s revenue growth, both past and present. Gilead’s 2013 revenues totaled $11.2 billion. In just four years Sovaldi has the potential to add 90%, or more, revenue growth for Gilead.
This is a brilliant looking chart – one which I think most investors would be thrilled with. And it’s not some small cap – Gilead is a $137 billion company.
Sovaldi is just one product, though. Gilead’s HIV treatments are also growing. And the company announced early approval of its first oncology drug, Idelalisib by the CHMP. This drug isn’t expected to be a blockbuster by any means, but a new drug is a new drug.
By 2018 Idelalisib should be generating over half a billion dollars in sales. That forecast should be around 2% of total sales in 2018, so not huge, but nothing to sneeze at either.
Idelalisib will be in focus for the remainder of the year as it progresses through the U.S. regulatory process. And Phase II data for colorectal and pancreatic cancer treatment, Simtuzumab, should also be out before year end.
Both drugs could show that Gilead is a company branching out beyond HIV/AIDS and hepatitis-C. If it can do so with even a fraction of the success it has had in those two areas, Gilead is a stock investors should stick with.
That’s especially true because the large cap will likely generate EPS above $7.60 in 2015. With shares trading at $90 today, even a 20% move higher would still have them trading at a 10% discount to the S&P 500, based on 2015 expected earnings.
Faster growth and less expensive then the broad market is tough to pass on – so don’t. I’m continuing to hold shares of Gilead for the long-term, and will likely accumulate if there is another retreat like that which occurred earlier this year.
This article is brought to you courtesy of Tyler Laundon from Wyatt Investment Research.