Analyst says Gilead is a buy after yesterday's drop

RBC's Michael Yee believes that Gilead's (GILD +0.6%) 4% drop yesterday in response to Merck's (MRK +0.4%) buy of Idenix (IDIX -0.3%) creates a nice buying opportunity. He says Sovaldi sales could hit $12B in 2015 driving EPS to $8 - 10 meaning the firm would likely sport a modest earnings multiple of only 8 - 10.

Mr. Yee states that the consensus view is that the U.S. HCV market will begin to deteriorate by 2016 but other long-term markets (ex-U.S.) are sustainable.

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Comments (16)
  • Hoang6
    , contributor
    Comments (358) | Send Message
    The drop is not attractive enough, better wait!
    10 Jun 2014, 11:40 AM Reply Like
  • 0xfc
    , contributor
    Comments (41) | Send Message
    The drop is an opportunity to open a 1/4 to 1/3 position if one is cautious. GILD will be back into the low 80s in a few days as people wait for the next earnings report.
    10 Jun 2014, 11:43 AM Reply Like
  • User 7530821
    , contributor
    Comments (239) | Send Message
    It remains a strong buy. Long GILD.
    10 Jun 2014, 11:52 AM Reply Like
  • wweirich
    , contributor
    Comments (217) | Send Message
    Volatility will be a namesake for this equity, even as the multiples are declining moving forward and its market for HCV naturally matures. Looking 6-10 years out, there will be competition, there will be cured Hep C patients (... a damn good thing if there ever was something good), and sales will peak and begin a slow decline. The spike in earnings will settle down, and we'll be looking for pipeline announcements, and probably other stocks to buy as well. I suspect - in this business - you can't be a rockstar for 40 years unless you are Mick Jagger.
    10 Jun 2014, 12:01 PM Reply Like
  • b3player
    , contributor
    Comments (627) | Send Message
    "you can't be a rockstar for 40 years unless you are Mick Jagger".


    Best SA comment of the month award.
    10 Jun 2014, 12:34 PM Reply Like
  • hessmessinc
    , contributor
    Comments (34) | Send Message
    Merck should be looking seriously at $ONCS to combine with MK 3475.
    10 Jun 2014, 12:36 PM Reply Like
  • cowboysteven
    , contributor
    Comments (6) | Send Message
    Long Gild
    10 Jun 2014, 12:37 PM Reply Like
  • SD86
    , contributor
    Comments (63) | Send Message
    Talking his book. Unfavorable bullish entry position right now.
    10 Jun 2014, 12:40 PM Reply Like
  • b3player
    , contributor
    Comments (627) | Send Message
    sd, what make you say that this is not a good entry point? Both Morning Star and Fast Graphs say otherwise.
    10 Jun 2014, 12:50 PM Reply Like
    , contributor
    Comments (15) | Send Message
    GILD has incredible profit potential with MRK paying 3.8 billion for a rival company in phase 2 testing. Someone else wisely stated that if GILD were even sniffing successful lawsuit, could have purchased for less than 1/4 yearly sales of Sovaldi. I am long, but have unwisely sold some of my positions along the way. People said GILD was overvalued at 50, then 60 then 70 and now 80. Kind of like my DIS, overvalued at 29, then 35 all the way up to 85. Talking heads will tell you sky is falling, but right now valuation metrics on this company have them treating less than 1% of infected population, and curing them so we should sell our positions because there will be no demand in 2 years. It is kind of like interest on a credit card. If you pay 1% as a payment you will never pay off balance. We are not even close to curing Hep C, Gild has a huge pipeline, but on Solvaldi alone, stock is a 100 to 120 valuation. If you value at what other takeover stocks have been, 100-120 is incredibly cheap, even though I have no reason to believe GILD would allow takeover because they know their profit potential as well as threats to future earnings. I am long GILD and using this pullback to add to my position without any trepidation.
    10 Jun 2014, 01:28 PM Reply Like
    , contributor
    Comments (404) | Send Message


    What Gayle said.
    10 Jun 2014, 01:44 PM Reply Like
  • doctorjomo
    , contributor
    Comments (225) | Send Message
    gayle i strongly agree.... also by the time the competition gets anywhere close in hep c they(gilead) will have enough profits to be able to slash costs below competition who will still need to recoup their developement costs ..... and respiratory syncitial virus drug and CLL drug phase 2 data very strong also company is dominant in hiv and what recently got o press was recent new cdc hiv rec"s reccomending for the first time preventative medication for 500,000 high risk americans cdc reccomended truvada which is a once a day combo of tenofvir plus emtricitabine both gilead products selling for 10,000 a year times 500,000pts =5 more billion a year handed to them by usa prevention policy.... then think about what happens when gay activists in europe in socialized health systems then demand truvada prevention what do think is going to happen ....cha-ching!
    10 Jun 2014, 02:54 PM Reply Like
  • Ralph208
    , contributor
    Comments (66) | Send Message
    Gayle I agree with you and here is what Yee really said (from Barrons):
    Bottom line, we believe the pullback is a buying opportunity because Q2 Sovaldi should be strong above $3B, it could push 2015E run-rate to $12B and well above consensus of $10B, all potentially driving earnings power of $8-10 EPS next year and thus Gilead could trade at 8-10x P/E. Consensus thinks HCV sales go bad in 2016 (HCV market demise) but we have said we believe long-term market is more sustainable, OUS is a significant opportunity, and Merck’s deal validates rational pricing…thus we think the demise is greatly exaggerated. After all, who pays $3.85B for a Phase I drug in a market that presumably will be dead in 3 years?
    10 Jun 2014, 05:03 PM Reply Like
  • kirgkyboy
    , contributor
    Comments (67) | Send Message
    go gilead, go,go, go gilead, my broker got me in at 23 I'm happy and long
    10 Jun 2014, 03:33 PM Reply Like
    , contributor
    Comments (404) | Send Message


    I hate you...


    You're probably a wildcat, too?
    10 Jun 2014, 03:55 PM Reply Like
  • combatcorpsmanVN
    , contributor
    Comments (1337) | Send Message
    $GILD - When it comes to moving from Phase 1 to Phase 3 to approval; the Beatles said it best: "It's a long and winding road"….. (and success isn't a slam dunk along the way to approval).
    11 Jun 2014, 10:51 AM Reply Like
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