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Gilead Sciences, Inc. (GILD) Stock: A Coronavirus Resistant Stock?

Updated on May 7, 2020
dougwest1 profile image

Doug is an active trader of stocks, bonds, and commodities, as well as an experienced non-fiction writer.

Introduction

Before the coronavirus pandemic had become widespread in the United States, the S&P 500 Stock Index, which is considered a key index in the broad U.S. stock market, reached an all-time peak of 3386 points on February 19, 2020. As people became infected with the deadly coronavirus throughout the world, stock markets everywhere began to fall. Stock market investors fear uncertainty and began to sell down their stock portfolios. By March 23, the S&P 500 Index had reached a near term bottom of 2237 points, which was a 34 percent drop, one of the harshest drops in the history of the stock market. However, not all stocks have fallen during the pandemic, some companies have prospered, and their stock value has increased. In this article, I present some information that would indicate that Gilead Sciences, Inc. is set to prosper during the pandemic crisis, resulting in a possible increase of the stock price.

On May 2, 2020, there was big news for Gilead Sciences when The Food and Drug Administration granted an emergency use authorization for their remdesivir drug. Though not a formal approval of the drug, it will make it easier for doctors to administer the drug to sick patients. The antiviral drug is considered a front-runner in the race to develop a viable treatment for COVID-19. It is the first new drug approved for an emergency usage authorization by the FDA during the pandemic. Dr. Anthony Fauci, the NIAID director, was positive on the results of two trials of the drugs that were released during the last week of April. Other medical experts have been more reserved in their appraisal of the clinical-trial data for the effectivity of remdesivir in expediting the recovery of COVID19 patients. Dr. Eric Topol, Director of the Scripps Research Translational Institute, tweeted: “That's very helpful and adds support to the conclusion that with remdesivir is an efficacious drug beyond recovery time (but not a miracle, or extremely potent one).”

In a National Institute of Health (NIH) study most patients treated with remdesivir showed significant improvement after 11 days, whereas the placebo group took 15 days. During the recent Gilead Science earnings call, the companies Chief Financial Officer, Andrew Dickinson, said the company will spend up to $1 billion in 2020 to further develop the drug. More trials are needed to determine the efficacy of the drug, but the company has pledged to give over a million free doses to be used by medical professionals.

Gilead Sciences, Inc. Company Profile

Gilead Sciences is a research-based biopharmaceutical company that discovers, develops, and commercializes medicines for U.S. and international markets. The company primarily develops drugs to combat viral diseases, inflammatory and fibrotic disease and oncology. Some of the company’s products include: Biktarvy for the treatment of HIV-1 infection, Vosevi used in the treatment of chronic hepatitis C virus infection in adults; Vemlidy for the treatment of chronic hepatitis B virus infection in adults with liver disease; Yescarta for the treatment of adult patients with large B-cell lymphoma; and remdesivir a decade old experimental broad based anti-viral drug first developed for the treatment of Ebola. The company was founded in 1987 and is headquartered in Foster City, California.

Stock price chart for Gilead Sciences, Inc. from November 8, 2019 until May 5, 2020.
Stock price chart for Gilead Sciences, Inc. from November 8, 2019 until May 5, 2020.

Gilead Sciences (GILD) Stock Price Movement

As of May 3, the 52-week high for the stock was $85.97 with a 52-week low of $60.89. Since early January, the price has shown a nice upward movement. The price increase of the stock in the last year is nearly 20 %, whereas, the Dow Jones Industrial Average (DJIA) has dropped over 22% in the last year.

Price-to-Earnings Ratio (P/E) for GILD

The price to earnings ratio (P/E Ratio) is the measure of the share price relative to the annual net income earned by the company per share. A high P/E ratio generally indicates increased demand because investors anticipate earnings growth in the future. A lower P/E indicates the company is a value stock, normally meaning the stock is reasonably priced to the amount of earnings the company generates.

Using earnings for the last 12 months the Price-to-Earnings (P/E) for GILD is 19, which is in-line with the industry median of 17.35. In comparison, other major biotechnology companies like Amgen (Stock Symbol: AMGN) has a trailing P/E = 17.9. Another similar biotech company Alexion Pharmaceuticals Inc., (Stock Symbol: ALXN) has a P/E = 10.

Earning-Per-Share (EPS) for GILD

The Earning-Per-Share (EPS) is calculated by dividing the company’s profit by the number of outstanding shares of its common stock. A high EPS is better. For GILD EPS = 3.90. In comparison, AMGN EPS = 12.8, and ALXN = 10.7. Gilead Sciences Earnings-per-share is weaker than both Amgen and Alexion Pharmaceuticals.

Debt-to-Equity (D/E) ratio for GILD

Another important factor when evaluating a company is the Debt-to-Equity (D/E) ratio which is calculated by dividing a company’s total liabilities by its shareholder equity. This number is a measure of the degree to which a company is financing its operations through debt versus wholly-owned funds, a lower number is better. D/E for the three stocks: GILD = 129.2, AMGN = 335.8, and ALXN = 25. Gilead Sciences is in the middle of the two comparison companies. During these perilous economic times, companies with a lower debt will tend to fare better. The average D/E ratio among S&P 500 companies is approximately 1.5.

Dividend Yield for GILD

The dividend yield is the amount of money a company pays shareholders over the course of a year for owning a share of its stock divided by its current stock price—displayed as a percentage. The dividend yield is the estimated one-year return of an investment in a stock-based only on the dividend payment, which are normally quarterly. For GILD the dividend yield is 3.3%, for AMGN = 2.77%, and ALXN pays no dividend to investors. Both GILD and AMGN pay higher dividend yields than the S&P 500 which has dividend yield of 2.3 %.

Chart of revenue and earnings growth for Gilead Sciences, Inc.
Chart of revenue and earnings growth for Gilead Sciences, Inc.

Earnings and Revenue for GILD

Company’s revenue has been dropping over the last three years – not a good sign - and the earning have dropped significantly since 2016 but are starting to rebound.

Analysts chart.
Analysts chart.

What the Analysts Think About GILD Stock

The analyst’s opinions are mixed on the appraisal of Gilead Sciences. Three analysts downgraded the stock after the end of April earning call. Raymond James’s Steven Seedhouse wrote “It’s not clear to us if remdesivir will be used much in COVID beyond the initial 1.5 million donated doses or beyond this near-term panic phase of the public health crisis.” The average of the analyst’s recommendations place Gilead Sciences somewhere between a “Buy” and a “Hold.”

References

Stockcharts www.stockcharts.com

Yahoo Finance https://finance.yahoo.com/

CNBC http://www.cnbc.com/

Lee, Jaimy, “FDA grants Gilead’s remdesivir emergency authorization for COVID-19 treatment” May 4, 2020. MarketWatch. Accessed May 5, 2020. https://www.marketwatch.com/story/how-gileads-remdesivir-became-the-leader-in-the-rush-to-find-a-treatment-for-covid-19-2020-05-01

Renauer, Cory. “Gilead Aims to Get Its Potential COVID-19 Drug to as Many Patients as Possible” May 1, 2020. Nasdaq.com. Accessed May 5, 2020. https://www.nasdaq.com/articles/gilead-aims-to-get-its-potential-covid-19-drug-to-as-many-patients-as-possible-2020-05-01

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2020 Doug West

Comments

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    • Ken Burgess profile image

      Ken Burgess 

      2 weeks ago from Florida

      Great article, and well timed.

      The thing I dislike about Bio stocks is one bad test or change in a law regarding a particular drug can send it crashing down.

      With most stocks all you have to worry about quarterly reports and trending economics related to its marketplace.

      So... what do you think about Bitcoin as a reserve with the looming financial turmoil ahead?

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