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Gilead Sciences (NASDAQ:GILD) has been in the news lately, with President Trump receiving doses of Gilead’s experimental antiviral drug Veklury (remdesivir) earlier this month to help treat his coronavirus infection. It’s already been an up-and-down year for Gilead — in March, the stock hit a 52-week high of $85.97 on hopes that Veklury, originally tested to fight Ebola, would be the big answer to ending the coronavirus pandemic.
The stock slowly came down to earth, however, hurt by a May report in the New England Journal of Medicine that said Veklury only shortened the time of hospitalization by four days in COVID-19 patients, compared to a placebo.
Earlier in October, the stock was trading at about $62 a share, which — while a long way from $85 — is more than three times what it went for after its initial public offering (IPO) in January of 1992.
Patient investors would have done quite well
On Jan. 22, 1992, the day of its IPO, Gilead traded for $20.16 per share. So, if you had $1,000 to spend on the stock back then, you would have been able to purchase 49 shares of Gilead. Over time and several stock splits, that would have grown to 1,568 shares today, which would make your original investment, not counting any reinvested dividends, worth $99,724.80 as of Monday’s close. That’s a compound annual growth rate (CAGR) of 17.9% and an overall return of 9,995%.
More recent Gilead investors haven’t been as fortunate. As recently as the summer of 2015, when the company’s drugs dominated the hepatitis C market, the stock was trading at $118 per share. Since then, facing growing competition in that market, the company’s revenues have fallen each year, from $32 billion in 2015 to $22 billion last year. Halfway through this year, the company’s reported revenues were $10.7 billion, down 2% compared to the same period in 2019.
Really relying on Veklury
In May, the U.S. Food and Drug Administration (FDA) gave Veklury an emergency use authorization (EUA) for use with hospitalized patients with severe COVID-19, including those patients with lower oxygen levels and those needing ventilators. Then, on Aug. 28, the FDA extended the EUA for Veklury to all patients with COVID-19. Veklury could be worth $2.4 billion next year and $2.1 billion in 2021, according to analysts polled by FactSet, though a successful COVID-19 vaccine would obviously curtail sales.
The company has priced the drug at $390 per vial for developed countries. With most patients taking six doses of the drug, that would typically mean a cost of $2,340 per patient, though that’s for government hospitals. Patients in U.S. hospitals with commercial insurance would wind up paying $3,120 for a six-dose regimen, or $520 per dose. Gilead justified the cost of the drug by saying it would save insurers $12,000 per patient by reducing the length of hospital stays.
Gilead has other things going on as well. The company’s stock got a brief bump last month when it announced on Sept. 13 that it was purchasing Immuomedics (NASDAQ: IMMU) for $21 billion.A day after the announcement, the stock climbed by nearly $3 a share, topping out at $67.92. Immuomedics just got promising phase 3 data that showed its drug, Trodelvy, significantly cut the risk of death for certain breast cancer patients who had failed at two or more chemotherapy regimens.
Filgotinib is a potential blockbuster
Another drug of Gilead’s, filgotinib, is in phase 3 trials for four different uses: rheumatoid arthritis, ulcerative colitis, psoriatic arthritis, and ankylosing spondylitis (a type of arthritis in the spine). It hasn’t been approved for any of those uses yet, and in August, the FDA rejected approval of the drug to treat rheumatoid arthritis, citing safety concerns. Gilead will probably refile once all the information from the phase 3 trial is in, but it likely won’t be able to get approval until sometime next year.
While the biotech company isn’t likely to offer a 17% CAGR again anytime soon, it is worth looking into. If a COVID-19 vaccine is delayed, the need for Veklury will definitely help the company’s revenue, and filgotinib would also help the company’s bottom line if approved.
In the meantime, the company offers a dividend of $0.68 per share, with a current yield of 4.35%. The company has raised its dividend every year since it began paying one out in 2015, including a 7.9% raise this year.