KEY POINTS

  • Gilead Sciences’ primary market, which focuses on HIV, is in good shape.
  • The firm also aims to expand its oncology division.
  • For income-seeking investors, the stock also has a generous dividend.

After a difficult couple of years, Gilead Science is ready to rebound. According to Gilead Sciences‘s (NASDAQ:GILD) management, Veklury, its COVID-19 therapy, has helped the company maintain its revenue and earnings growth in the past two years. On the other hand, the biotech’s antiviral coronavirus treatment significantly dragged top-line growth in the second quarter. As a result, Gilead Sciences’s sales increased by just about 1% year over year to $6.3 billion.

Gilead Sciences’ revenues rose 7% year over year in the quarter, excluding sales of Veklury, which decreased by 46% against the same period last year to $445 million. Veklury’s earnings will likely fluctuate based on coronavirus pandemic surges, competing therapies, immunization rates, and other variables. Fortunately, there are several visible indicators of brighter days ahead for Gilead Sciences, irrespective of Veklury. Here are two reasons to believe Gilead Science is ready to rebound.

Its HIV sector is recovering

Regardless of economic situations, basic medicines are almost always necessary. However, when the COVID-19 epidemic began, HIV testing and diagnosis decreased considerably. These changes damaged Gilead Sciences’s most important segment. Additionally, some of Gilead Sciences’s HIV medications lost patent exclusivity protection, decreasing sales.

Despite these challenges, Gilead Sciences’s HIV sector appears to be progressing steadily. The company’s revenue from this unit increased 7% year over year to $4.2 billion during the second quarter.

Gilead Sciences’ top-selling HIV medication (and overall) is Biktarvy. Sales of the therapy increased by 28% year over year to $2.6 billion during the second quarter. Biktarvy is the most popular HIV drug in the United States, as well as the fastest growing. Biktarvy’s market share rose four percentage points year over year to 44%. Descovy, another Gilead antiviral drug used to treat HIV, is also doing well. Sales of Descovy climbed by about 6% annually to $460 million during the same time frame.

New HIV therapy is on the way

More wonderful news: the firm resubmitted its application to the US Food and Drug Administration (FDA) for lenacapavir, an experimental six-month, long-acting HIV therapy, during the second quarter. The agency had rejected it in March on the grounds of vial incompatibility.

Gilead volleyed with health industry bodies before resubmitting this application, and it appears likely that lenacapavir will be approved this time. When it does, it will help to replace older medications that have lost patent protection. In addition, there are currently no HIV therapies on the market with a six-month treatment regimen. Lenacapavir would be the first of such therapies. As a result, it has the potential to capture a significant share of the market from competing drugs.

The FDA set a PDUFA goal date (the latest date by which it will finish the therapy review) of December 27 for the drug.

An advancing oncology sector

Gilead Sciences is not well-known as a cancer treatment company. Yet, it generated $527 million in revenue from its oncology division during the second quarter, an increase of 71% year over year. In addition, cancer therapy Trodelvy had sales climb by 79% to $159 million during that time. Trodelvy received FDA approval in 2020.

Based on the positive sales trends, the firm expects this drug to have a long period of sales increases. Moreover, given Gilead Sciences’s plans, it seems to have many more years of sales growth ahead. Gilead Sciences has previously stated its intention to make a more significant impact in oncology by increasing investment in research and development activities, including conducting additional clinical trials in this therapeutic area.

The biotech has announced that it will conduct at least 20 oncology clinical trials this year, with seven late-stage studies for Trodelvy.

Remember the dividend

The Gilead Sciences coronavirus tailwind has probably died down. Despite COVID-19 remaining with us, sales of Veklury are unlikely to drop to zero, but they will become somewhat unpredictable, even if COVID-19 stays put. Fortunately, the rest of Gilead’s business appears to be on track for a recovery. Both HIV and oncology segments at the firm have promising futures.

Trodelvy and lenacapavir are newer breakthroughs that should aid in expanding both top and bottom lines. Gilead is an excellent investment for income-seeking investors, as the firm’s yield of 4.9% is well above average. In addition, the company has a track record of payout hikes, which is just one more incentive to consider investing in this biotech behemoth seriously.

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