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David Sims is a full-time independent analyst and contributor on popular investment sites such as Seeking Alpha. David covers distressed equities and activist investing campaigns most recently. In the past, covered topics included covered call trading and the housing market. David is Certified... More
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  • Update: Gilead's Harvoni About To Break Expectations

    Note: This is an update to a previous opinion titled "Expect Gilead Sciences to Outperform."

    Back in July, Gilead (NASDAQ:GILD) reported blow-out earnings and it became clear that the company fit nicely into the special category of stocks that can be labeled both value and growth stocks.

    At the time, I initiated a position and provided a $125 price target on the common shares. Midway through the 3rd Quarter, it became clear that Sovaldi sales might be a little light for the period. The reason for the "weakness" in sales was the imminent release of Harvoni, and the "warehousing" of patients headed into the 4th Quarter.

    Now that we are several weeks into the initial period of Harvoni sales, we can see clearly that this will be one of the biggest drug launches in the category. The following chart was posted on Twitter.

    (click to enlarge)

    As you can see from the chart (on the bottom right), the upward momentum in Harvoni sales indicates that sales are growing fast.

    How fast?

    In the week ended 10/31, IMS data reports that total Sovaldi and Harvoni prescriptions were 6,286. Of this amount, Harvoni prescriptions were 1,983, increasing 80% from the previous week's 1,111.

    A research note published by Barron's shows that the company needs total average prescriptions of 7,900 from Sovaldi and Harvoni combined during the period to meet analyst expectations for the quarter.

    Can they meet this figure?

    Simply straight-lining the sales gains, an investor might expect the company to hit the 7,900 total prescription figure in about two weeks. The question is whether they can maintain these sales gains and pace for the next two weeks.

    Comparing Harvoni to Sovaldi, in terms of the pace of sales gains, Harvoni is actually about two weeks ahead of Sovaldi, reaching nearly 2,000 total prescriptions in three weeks vs. five weeks.

    After 7 weeks of sales, Sovaldi hit nearly 3,000 prescriptions. Harvoni may be on track to hit this figure in the 5th week of sales.

    If Gilead meets and exceeds sales forecasts, they will have the two fastest growing drugs in the Hepatitus C market, extraordinary sales growth, and a price to earnings multiple that puts them among the cheapest of the biotechs.

    Citigroup has provided a bull case and bear case for combined Harvoni and Sovaldi sales in the following chart. As you can see, in their bull case, they expect total prescriptions (NYSEMKT:TRX) for Sovaldi and Harvoni to reach 4,302 and 2,837 for the week ended 11/7. This totals 7,139 TRx for the period.

    (click to enlarge)

    With a current forward P/E of less than 11, this stock represents a significant value. If total Harvoni and Sovaldi prescriptions hit 7,100 for the period ended 11/7, I will raise my price target above $135 per share.

    Tags: GILD
    Nov 09 2:51 PM | Link | Comment!
  • Update: Conservative Coalition Sends Message To Financial Services Committee

    A coalition of conservative groups has sent a letter to the U.S. House Committee on Financial Services regarding transparency and accountability in government and specifically the Third Amendment to the bailout agreement with Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC).

    The Third Amendment of the Preferred Stock Purchase Agreement is the center of multiple lawsuits and is considered by many shareholders to be an unlawful taking of private property. This amendment is also referred to as the "Sweep Amendment" because of the Treasury's decision to sweep the majority of each company's net worth as a cash payment in lieu of a dividend.

    The groups signing the letter include:

    This adds to the growing chorus of conservative voices joining shareholders and the cause that has long been championed by Ralph Nader.

    Tags: FMCC, FNMA, long-ideas
    Sep 18 4:54 PM | Link | 2 Comments
  • Big Week Ahead For Economic Data

    On Monday June 2nd, we get the ISM index reading and Construction spending. The ISM index for May is supposed to bring a reading of 55.6. The April construction spending is supposed to bring in a reading of 0.7 percent growth.

    US Construction Spending Chart

    US Construction Spending data by YCharts

    On Tuesday June 3rd, we will get Factory Orders data, as well as Auto Sales. Factory Order growth for April is expected to read 0.5%.

    On Wednesday June 4th, the ADP employment report will be released. The market expects 200,000 jobs added for the period of May 2014. Unit Labor costs, Productivity, and the Fed's Beige book will also be released.

    ADP Change in Nonfarm Payrolls Chart

    ADP Change in Nonfarm Payrolls data by YCharts

    On Thursday June 5th, the Challenger job cuts report will be released, shortly before we get the initial claims report for the prior week. Last week, the 4-week average of initial claims hit a 7-year low. The market expects an initial claims reading of 310,000 for the prior week.

    US 4-Week Moving Average of Initial Claims for Unemployment Insurance Chart

    US 4-Week Moving Average of Initial Claims for Unemployment Insurance data by YCharts

    On Friday June 6th, the non-farm payrolls report and the unemployment rate will be released by the Bureau of Labor and Statistics. The market expects job growth of 220,000 and the unemployment rate to check up to 6.4%.


    If the market truly expects job growth of 220,000 while the initial claims rate is hitting 7-year lows there will be a surprise to the upside. Unless there is some funky data in the 6.3% reading from last month, the unemployment rate should easily beat the 6.4% expectation provided by the market. Who is providing this data and these expectations anyway?

    Several indices recently hit their all time highs. The Russell 2000 (NYSEARCA:IWM) even hit a new high then corrected by 10 percent in May. Meanwhile, the S&P 500 (NYSEARCA:SPY) has hit new highs without correction.

    If inflation continues to trend upwards, as it has in a few recent reports, and employment continues to accelerate, then the economy could be well on its way to the higher growth rates expected in the 3rd and 4th quarters.

    Disclosure: I am long IWM.

    Tags: IWM, SPY
    Jun 02 8:06 AM | Link | Comment!
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