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lookoutgrady 5 posts  |  Last Activity: Dec 12, 2014 9:19 AM Member since: Nov 15, 2007
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  • By Ben Levisohn
    RBC’s Michael Yee and team tell Gilead Sciences’ (GILD) shareholders not to worry about the bears:
    Associated Press
    Over the past months, investor sentiment has shifted from bulls enjoying significant upside consensus earnings revisions to many going into 2015 worrying and telling us the “bear case” such as: (1) Q4 Hep C sales may miss consensus (analyst expectations a bit high for Q4), (2) competitor AbbVie (ABBV) is coming by 12/22 and may take lots of share from Gilead, and “payors are in control” and AbbVie “will just significantly rebate” to get more share from Gilead Sciences than consensus thinks…and then Merck (MRK) is coming in 2016, causing Gilead Sciences Hep C sales to flatten out in 2015-16 so no more growth, (3) pipeline isn’t enough to overcome Hep C short-tail and so visibility is limited at best beyond 2015.

    We think these issues are understandable but won’t play out – and we expect Gilead Sciences stock will generally work higher. In contrast to bears, fundamentally, and based on our discussions with docs, and especially with the stock back at 10x buyside consensus next year, our call is: (1) AbbVie may get a long “24-week” (not 12-week) label for cirrhotics, making AbbVie’s regimen less interesting/competitive, and they’ll price rationally around $85-90K for 12 weeks’ non-cirrhotic use but thus $170k+ for 24-week cirrhotics, (2) payors have “adjusted” and are “better prepared” for HCV after 2014 and built in the impact for ’15 and can’t truly “block” Harvoni on formularies since it’s the only drug for GT2/3, and AbbVie also has drug interactions with another 30% of pts, (3) Gilead Sciences will meet or beat 2015 US consensus of $12B, (4) they’ll beat OUS ’15 consensus of $3B possibly by $1B+ over the year, (5) they’ll recruit senior oncology personnel and leadership to increase focus on cancer and immuno-oncology in 2015-16 and may do more bolt-on deals, (6) continued aggressive buybacks and our view is they’ll eventually give

    Sentiment: Strong Buy

  • lookoutgrady lookoutgrady Dec 11, 2014 7:45 PM Flag

    Yet Gilead doesn’t look poised to deliver a worst-case scenario — perhaps just the opposite. With first-mover advantage in the HCV space — and less-than-promising results from other big pharma peers like Merck ( MRK ) and Bristol-Myers Squibb ( BMY ) — Gilead will probably remain the industry leader, especially given the ease of taking Harvoni: just one pill a day. Even AbbVie ( ABBV ), probably Gilead’s closest competitor in HCV, can’t match that convenience — so many doctors and patients are likely to prefer paying a premium for Harvoni over whatever discounted treatments AbbVie ultimately launches.

    Moreover, given the fanfare around HCV, many investors have forgotten about Gilead’s $9 billion HIV business and its ongoing research in other areas. “I would argue that [investors are] paying nothing for the potential upside of Gilead’s R&D pipeline,” says John Park, co-portfolio manager for the Oakseed Opportunity Fund ( SEEDX ), which recently counted the stock as its sixth-largest position. He notes that Gilead recently submitted a new formulation of its HIV drug tenofovir alafenamide (TAF) for approval, an important development that’s being overshadowed by Harvoni.

    “The biggest thing people forget about is the management track record,” says Park. “In the 1990s, Gilead had no products and no profits. Not a lot of those companies make it to the size Gilead is today, and even fewer make it with the same CEO. John Martin has demonstrated a lot of value creation.” Gilead’s market value is about $158 billion.

    Sentiment: Strong Buy

    Dec. 11, 2014 8:01 a.m. ET
    It’s unusual for a stock to be a favorite of both growth and value investors — but then Gilead isn’t a typical pharmaceutical company.

    Most investors know Gilead Sciences (ticker: GILD ) for its blockbuster treatments for HIV and hepatitis C (HCV) — and its big swoon this spring when the biotech sector as a whole sold off. Yet while the stock has bounced back strongly, its valuation remains low, even as prospects for its drugs look brighter than ever. The Food and Drug Administration approved its latest HCV drug, Harvoni, in mid-October, and it is expected to log $1.4 billion in sales in the fourth quarter alone.

    “A lot of traditional value companies are trading at a higher multiple than Gilead,” says Brain Lazorishak, portfolio manager of the Chase Growth Fund ( CHASX ), which recently counted Gilead in its top five holdings. He says that while some discount is warranted given uncertainty around future drug sales, at current levels the stock is at an attractive entry point. “If things go right, there’s a lot of upside, and with the valuation where it is, it’s [already] discounting the possibility of things going wrong.”
    Indeed, at just 10.5 times forward earnings — versus 17 times the Standard & Poor’s 500 — Gilead seems to already reflect significant risk. And even if 2015 earnings per share match the lowest of Wall Street’s 27 estimates, the stock, at a recent $104.84, would be at 13.7 times forward earnings. That, too, would be cheap given that earnings per share are projected to rise 25% from this year to next.

    Sentiment: Strong Buy

  • lookoutgrady lookoutgrady Dec 11, 2014 6:07 AM Flag

    Great find! It would be good to hear more about the up-listing mentioned in the write-up

    Sentiment: Strong Buy

  • lookoutgrady by lookoutgrady Oct 29, 2014 7:52 PM Flag

    "Trading at 11.5 times forward earnings, Gilead doesn’t look too pricey, despite touching a new high earlier this week. That multiple is below many of its peers, and while some discount is warranted given the uncertain outcome of many of its drugs, it seems too cheap given that on average analysts expect the company to log long-term EPS growth approaching 20%. Gilead also repurchased $1.7 billion of its stock in the quarter."

    Sentiment: Strong Buy

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