Is it time to load up on Gilead?

GILD - Gilead Science

Gilead Sciences is a leading global biopharmaceutical company. It discovers, develops and commercializes innovative medicines in the therapeutic areas of HIV, liver disease, oncology and inflammatory and respiratory diseases.

By products, HIV accounted for 76% of total sales, followed by HCV (12%), Yescarta (2%) and other products (10%). The company has a large presence in 35 countries across six continents. The U.S. is Gilead Sciences’ largest market constituting 76% of total sales. Europe (15%) and other international markets (9%) are its other large markets. The company has a wide geographic reach with its products being distributed throughout the world. More than 11 million people benefited from Gilead medicines in low- and middle-income countries in the last year.

Biktarvy was the most prescribed HIV regimen with a presence in more than 25 markets and was the #1 prescribed regimen for treatment-naive and switch patients in Germany, France, and Spain. Biktarvy now accounts for the majority of Gilead’s revenues.

Investment Data

Revenue Growth & Market Exposure

Gilead has come a long way from a small Northern California company to an organization with a large product portfolio and having a worldwide presence. With more than 30 years of experience in healthcare, the company continues to successfully build new partnerships and collaborations to advance scientific innovation and launch successful products. It recently collaborated with Galapagos, a Belgian pharma company, which enables it to gain access to Galapagos’ portfolio of compounds. Gilead has been growing through acquisitions. It has expanded its oncology portfolio with the acquisition of Kite Pharma. Its Yescarta became the first chimeric antigen receptor T (CAR T) cell therapy for cancer treatment. The acquisition of Cell Design Labs further strengthened its cell therapy segment.

Gilead has been a pioneer in treating patients with HIV disease. It has been working on HIV treatments since the late 1980s when HIV/AIDS was seen as a fatal disease. But today, its medicines are helping people diagnosed with HIV enjoy healthier lives. The company spent a whopping 23% of its total revenues on research and development in FY’18. Strict government regulations and a strong patent portfolio form a deep moat around Gilead’s business.

Gilead has a significant footprint in serious therapeutic areas. The company continues to lead and innovate in HIV with multiple medicines and new ways of managing the disease. In the area of liver disease as well, Gilead’s products for the treatment of HCV and HBV, and advanced trials with investigational medicines continue to make considerable progress. Gilead now expects its product sales to be between $21.8 billion and $22.1 billion, slightly higher than its previous guidance.

Dividends

Gilead Sciences is a Dividend Starter paying quarterly dividends since 2015 and also increasing them every year since then. The company continues to deliver strong operating cash flows. It paid $3 billion in dividends and $2.9 billion in share repurchases to its shareholders in the last year. Gilead last raised its dividend by 10.5% and sports an annual average yield of 3.8% currently. Its earnings also grew at a rate of 15% CAGR in the last five years.

The company has a sound track record of acquiring and successfully integrating businesses.In 2018, Gilead entered into 25 partnerships, licensing, and M&A with leading biopharma companies like Pfizer, Sangamo Therapeutics, Verily, etc. to significantly enhance its research pipeline in various therapeutic areas. Gilead’s strong balance sheet grants it the much needed support to expand its pipeline through mergers and partnerships.

As a leading biopharmaceutical company, Gilead works to solve some of the world’s biggest health challenges by developing innovative medicines. The company enjoys 75% of the market share of HIV medicines globally. Its increasing focus on oncology treatments will help it further diversify revenues. The company should continue to benefit from the increasing demand for medicines for life-threatening diseases.

Gilead has a promising inflammation drug, filgotinib in the pipeline, which is poised to become a top-selling product for the company. The company also has a healthy pipeline of other HIV-focused medicines. Its domination in the HIV market and expected lead in inflammation, NASH, and oncology should support future dividend growth. 

Competition

Gilead competes with leading global medical companies. It faces competition from generic pharmaceuticals and biosimilars. The company suffers from intense price competition from generic forms of the product. Gilead Sciences competes with leading healthcare companies like Walgreens Boots Alliance, UnitedHealth, Genentech, CVS Health, Novartis, Avella Specialty, Merck, etc. A lean operating structure and strong patent portfolio support Gilead’s free cash flow margins.

Bottom Line

Healthcare business is relatively immune from fluctuations in the economic cycle and Gilead’s leading market share positions it well to gain from the growing healthcare industry. Through its innovative solutions, Gilead engages in providing increased access to multiple medicines and reduce overall healthcare costs. The company is poised to benefit from strong growth in its HIV business, innovation streak and a strong pipeline of products. Its growth in emerging markets also positions it well for future growth. Gilead should, therefore, continue its dividend payment streak in the future.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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