Why Invest In Gilead Sciences Stock?

Above: Why Invest In Gilead Sciences Stock?

An estimated 37 million people around the world have HIV. Around 17 million of them are taking prescription drugs to treat their condition, with the majority of those HIV drugs having been developed by Gilead Sciences. In fact, the total global HIV drug market totals more than $20 billion annually, with Gilead Sciences claiming the highest market share of any HIV drug maker in the entire world. This big biotech company had eight HIV drugs combine for sales of more than $12.8 billion in 2016, with Gilead’s Truvada being the top selling HIV drug in the world.

While the growth of Gilead Sciences was due primarily to its HIV franchise for much of the company’s history, in recent years its hepatitis C virus (HCV) drugs have made even more money. In 2016, Gilead’s hepatitis C virus (HCV) drugs combined to generate revenue of $14.8 billion. However, hepatitis C virus (HCV) sales are falling significantly, partially because of increased competition but resulting even more from lower patient starts, as the sickest hepatitis C virus (HCV) patients have already been cured by Gilead Sciences.

Finding The Cure For Hepatitis C

Throughout the course of human history, there have been plenty of drugs developed to treat diseases. However, there haven’t been nearly as many drugs that actually cured a disease. That is especially the case for a chronic disease like hepatitis C, which affects millions of people across the world. But Gilead Sciences changed history by introducing a cure for hepatitis C.

In December 2013, the U.S. Food and Drug Administration (FDA) approved Sovaldi, and Gilead quickly launched the drug. To say that Sovaldi was successful would be a huge understatement. The drug enjoyed the fastest launch ever, and in its first quarter, Sovaldi became a mega blockbuster, generating sales of $2.27 billion.

Gilead Sciences followed up on that success with Harvoni, which launched in the fourth quarter of 2014. Harvoni is a combination of Sovaldi and another Gilead drug, Ledipasvir. In 2015, sales for Harvoni reached a whopping $13.9 billion, with Sovaldi adding another $5.3 billion. However, there is a big problem for a biotech or pharmaceutical company that sells products that cure a disease. After a period of time, there aren’t as many patients to use the products, and that is exactly what happened with Gilead Sciences. The company became a victim of its own success. Sales for its hepatitis C drugs are falling, weighing down Gilead’s overall revenue and earnings.

Gilead’s best hope now for returning to growth is to make one or more biotech acquisitions. The company has indicated that’s exactly what it plans to do in the near future. The good news is that Gilead Sciences has a pretty good track record of making deals. In 2011, Gilead Sciences spent $11 billion to buy Pharmasset, which owned the drug that would eventually be called Sovaldi, a drug that would eventually cure hepatitis C for millions of people suffering from the disease around the world, and making the shareholders of Gilead Sciences very wealthy in the process.

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