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Gilead: COVID-19 And Forty Seven Add To Intrigue Of A Company In Transition

Mar. 09, 2020 7:59 PM ETGilead Sciences, Inc. (GILD) Stock41 Comments


  • Gilead's revenues and share price have been in long-term decline owing to the collapse of its Hepatitis C franchise.
  • The company's HIV franchise has been its saving grace and continues to deliver treatments with blockbuster sales such as biktarvy.
  • The acquisition of Forty Seven comes at a huge premium, but the company has bought winners in the past, and this could be another one.
  • The hype around remdesivir as a potential treatment for COVID-19 is unlikely to be justified - but this "black swan" event could provide a huge and unexpected windfall.
  • Revenue projections for 2020 are $21.8bn - $22.2bn, but I suspect the company can over-deliver. In any case, the company is building for the long term - this plus current climate makes Gilead a potential buy.

Investment Thesis

Gilead Sciences (NASDAQ:GILD) has found itself in the spotlight this week for 2 main reasons. The first is - as most people doubtless know by now - related to the potential of the company's investigational drug remdesivir to treat COVID-19/the coronavirus.

The second is the company's surprise $4.9bn acquisition of Forty Seven (FTSV), an early stage biotech developing anti-CD47 directed therapies - most notably magrolimab, currently being evaluated for treatment of a range of cancers, including myelodysplastic syndrome ("MDS"), acute myeloid leukaemia ("AML") and non-Hodgkin's lymphoma ("NHL").

The market excitement around remdesivir has seen Gilead's stock price jump 22% from a more-or-less 5-year low of $62.5, to $76 - its highest level since September 2018. These gains may have been stymied by Gilead's announcement that it is to acquire Forty Seven - a company whose stock traded at $6.5 in early November 2019 - for a staggering $95.5 per share. Gilead investors could be forgiven for asking why a company would announce a major acquisition at a questionable price at the height of its first significant share price spike in nearly 2 years.

Gilead hired ex-Roche CEO Daniel O'Day as CEO in March '19, who has overseen numerous departures and arrivals at senior management level, and is trying to effect a turnaround in the company's fortunes. Whilst the Forty Seven purchase may remind investors of the $11.9bn acquisition of Kite Therapeutics in 2017, which has produced only one commercialised drug - yescarta (2019 sales - $0.5bn) to date, it's also worth remembering the $11bn acquisition of Pharmasset in 2012 which sparked Gilead's Hepatitis C franchise into life. Both Forty Seven and Kite have potential, in my view.

Gilead has experienced a tumultuous few years. In 2015, driven by $19bn per annum sales of its hepatitis C ("HCV") drugs, the pharma reported total sales of $32.6bn

This article was written by

Edmund Ingham profile picture

Edmund Ingham is a biotech consultant. He has been covering biotech, healthcare, and pharma for over 5 years, and has put together detailed reports of over 1,000 companies. He leads the investing group Haggerston BioHealth.

The group is for both novice and experienced biotech investors. It provides catalysts to look out for and buy and sell ratings. It also provides product sales and forecasts for all the Big Pharmas, forecasting, integrated financial statements, discounted cash flow analysis and market by market analysis. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in gild over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (41)

cbrw profile picture
Apparently that’s why Gilead was up, not because the rest of the market was up 10%.
cbrw profile picture
now I see it on SA's page. I guess I missed this story.
cbrw profile picture
Did anyone see this article in the IDB?
”Gilead Pops After Coronavirus Drug Helps Cruise Ship Patients In Japan“
Time to buy OTM calls?
You don't think the libs are gonna have a problem with $GILD profiting from covid?!
Probably but look here...The president plainly stated in his speech last night “we are cutting vast amounts of red tape to make antiviral therapies available in record time. These treatments will significantly reduce the impact and reach of the virus.”
ProfessorSmatt profile picture
buying hard here results can come out within the next week or so for those trials In Washington State. So far so good I hear! Anyone from out that way hear anything?
This is a translation from a Report in Chinese:
March 5 is a memorable day. For the people in the epidemic, the best news on this day is that there are drugs that are really effective to treat coronavirus!
The latest news is revealed in an interview with Professor Cao Bin, who is in charge of the clinical trial of the new coronavirus treatment drugs in Wuhan, (Professor Bin Cao is Deputy Dean of China-Japan Friendship Hospital, Deputy Dean of National Institute of Respirology, Chinese Academy of Medical Sciences).
He first introduced the good results obtained by using Lopinavir to treat patients with COVID-19. Both HIV and COVID-19 are RNA viruses with the same transcription pathway. 199 critically ill patients participated in Lopinavir's clinical trials. This is mainly because Lopinavir 's domestic indication is only HIV, the use for corona virus treatment needs to be approved by the ethics committee, and it needs to be clinically verified before it can be used. Now the effect of clinical trials is good, which is the control group. Under standard therapies (to avoid patient harm), Lopinavir 's treatment is effective and more effective than standard treatments.
He then introduced the progress of Remdesivir in clinical trials. Remdesivir conducted two trials, one for mild patients and one for severe patients. The condition of severe patients was the same as that of patients in the Lopinavir test group. Similarly, the control group uses standard therapy, so there is no ethical issue that will delay the treatment of the control group, and the key is to see if the treatment group is better than the control group! From the clinical situation, Remdesivir has a stronger antiviral response than Lopinavir 's. Therefore, if Lopinavir 's test results are good, then remdesivir’s efficacy may be better from clinically and virologically compared to Lopinavir 's.
Judging from participation in the trial, there were 64 patients in the mild group and 233 in the severe group.
It is believed that after the progress and effect of the trial today, more patients will be willing to participate in this clinical trial. The phase III clinical trial of remdesivir will no longer face the dilemma of abortion because of insufficient patients, and patients worldwide. It will also get better treatment because of the results of the Chinese Phase III clinical trials. This is really the great contribution of the suffering Wuhan patients to the world.
The information brought by Professor Cao Bin today shows that the valid information about remdesivir disclosed at the press conference held by the World Health Organization's expert group leader in Beijing a few days ago is correct.
braliv profile picture
Thanks for the informations! The trial start March the first in Usa for sever and mild group is 10 days or 28 days! I had read that it was for only 10 days!! Therefor the result schould be ready! Your opinione please!
And now last night...The president plainly stated in his speech last night “we are cutting vast amounts of red tape to make antiviral therapies available in record time. These treatments will significantly reduce the impact and reach of the virus.”
I would not gamble on GILD for Remdesivir. The reason is simple reason - only medical staff currently conducting tests and few in GILD involved )include top management) know what is really going on.

It is laughable for whatever anti insider trading law. If any CEO don't know how to use anonymous offshore accounts, how can he suck money from you? For doctors on field, of they wish, they can trade through others' accounts. Of course, must be someone which they can trust.
ProfessorSmatt profile picture
That’s so not true!
For an ongoing experiment, people direct working on it know likely results before it concludes. During this kind of double blink test, involved doctors check patients daily, they know .... and they need to communicate with GILD on technical front but GILD will limit this information chain to few.

I don't know thus don't gamble, neither LONG nor SHORT.
Thats not true... It is a double blinded placebo controlled study. The results will be verified by independent Data Monitoring Committee (this includes top independent physicians).
chriscar profile picture
WHO Assistant Director Bruce Aylward told a press-conference in Beijing that "There is only one drug right now that we think may have real efficacy and that's remdesivir".
I'm buying more during this fire sale and also catching the dividend.
And nowThe president plainly stated in his speech last night “we are cutting vast amounts of red tape to make antiviral therapies available in record time. These treatments will significantly reduce the impact and reach of the virus.”
Matt-Man profile picture
@Rebfromtn I thought same thing, there is few other non approved antivirals on test but Remdesivir is only one getting some nods in China so far
chriscar profile picture
Anything that the 'Adderal wonder' utters, I take with a grain of salt.
Matt-Man profile picture
Good article, one typo ‘ $11bn acquisition of Pharmasset in 2012 which sparked Gilead's HIV franchise into life. ’ should be HCV
Edmund Ingham profile picture
apologies you are right and that's now been amended.
BiotechBillionair profile picture
Gilead becomes the next Pfizer if they buy AMARIN and mesh Vascepa into cancer, NASH, Alzheimer’s and of course the already FDA approval for cardiovascular events & death. Gilead needs to add Vascepa to numerous ongoing clinical trials not just NASH! The science is incredibly strong also theorizing Vascepa would help in coronavirus trials via stemming cytokine storm reactions to viral pneumonia’s. www.sciencedaily.com/...

Wake up Gilead!

chriscar profile picture
Goalkick9 profile picture
Good, detailed article. One factual error requires correction, however... this stock has never traded at $150 or anywhere close to it. The 2015 high was around 120. Typo?
Edmund Ingham profile picture
yes that's correct - my apologies it's now amended
Ron Burgundy’s Hair profile picture
Long GILD but do not see a sustained share price appreciation from COVID-19 unless it re-emerges next flu/cold season
chriscar profile picture
The viruses have 'emerged'. The statistics on COVID-19 are skewed by significant lack of testing.
Ron Burgundy’s Hair profile picture
‘re-emerge’ is in reference to 2021 and not 2020. It is currently speculation the COVID-19 will come back again next year which would increase GILD’s drug sales (if current efficacy results support).
Goalkick9 profile picture
There is currently no scientific evidence that COVID-19 is seasonal and will be slowed by warmer weather, as Trump and others have claimed. It may turn out that way, but nobody knows.

"I think it's premature to assume that," Dr. Nancy Messonnier, the head of the National Center for Immunization and Respiratory Diseases at the CDC, said of Trump's claims during a call with reporters. "We haven't been through even a single year with this pathogen."

As to Remdesivir, the first study data from China should be available by next week, and positive results will likely mean immediate and widespread distribution of the drug in China.
shunnan profile picture
totally enjoyed reading your article and have a broad understanding of how GILD is performing with its current portfolio and also what's up and coming, thank you!
PACKER man profile picture
Buying more to get the dividend; goes ex div 3/12
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