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FDA Approval Means Huge Jump for Gilead Sciences (NASDAQ:GILD)

Friday, October 23, 2020 | Steve Anderson
FDA Approval Means Huge Jump for Gilead Sciences (NASDAQ:GILD)

We've been following Gilead Sciences (NASDAQ:GILD) since April, and the company's efforts to treat the coronavirus have finally delivered some very big results. While its primary coronavirus treatment vehicle remdesivir had previously received FDA approval on an emergency basis, the agency has tipped the scales fully, and now we have a new, fully-available treatment for COVID-19 in remdesivir.

A Sort-Of First of its Kind

The approval of remdesivir makes it the first of its kind, in a way. This is the first time that the FDA has actually approved—and not just on an emergency basis—a treatment for the coronavirus. Those who want to get their hands on some will need to ask their doctors about Veklury, as that's the brand name the drug will be sold under now. It will be available, reports note, for patients at least 12 years old, and for cases that need hospitalization.

Currently, the drug is only available intravenously, though Gilead is said to be working on an inhaled version, on a timetable that is as yet unknown. Originally established as a treatment for Ebola, remdesivir didn't actually do much to treat the disease, but it was later discovered that it would work against COVID-19. Those hoping for a pill form will be disappointed forever, as putting remdesivir in pill form would reportedly potentially cause liver damage.

The FDA's approval of the drug ultimately stemmed from three separate clinical studies, all of which came out positively, and represented what FDA Commissioner Stephen Hahn considered a drug that had been “...rigorously assessed and represents an important scientific milestone.”

Another Brick in the Wall

As good of news as this is for Gilead and its investors—the company gained almost 3% in pre-market trading—it's actually just one more brick in the wall of available medications that Gilead offers. About a month ago, we had a look at some of those other treatments that Gilead made available, including a breast cancer treatment known as Trodelvy and a treatment for HIV called Truvada.

The recent deal the company established buying Immunomedics (NASDAQ:IMMU) certainly helped matters, though Gilead shelled out a hefty $21 billion to get hands on that company. When a company has a product line of one, it might be considered a shaky investment proposition. When it has several, it's much less likely to fall into such a trap.

Skeptical Analysts Ahead, and With Good Reason

Interestingly, our own research on the matter reveals that Gilead is, at once, one of the most downgraded stocks out there and one of the leading “beat-the-market” stocks. In fact, the company has been sitting at a “hold” recommendation for the last six months. The proportions of interest levels have changed very little in that time; six months ago, the company had four “sell” ratings, 13 “hold” and 12 “buy.” Jump to the present day and the company sits at two “sell,” 15 “hold” and 10 “buy”. The price target has edged up a bit from six months ago, though is down from three months ago, going from $77.12 to $80.35 to $78.93 in that time span.

An outlook like this might seem odd for a company that's basically just beaten the odds and developed an FDA-approved treatment for coronavirus well, well ahead of any kind of vaccine. Yet Gilead Sciences has long had troubles in terms of its economics. The company currently prices the run of remdesivir treatments, a six-vial operation, at $2,340 for government healthcare coverage and $3,120 for US residents with private health coverage. There has been some evidence already that the Truvada HIV treatment was priced so prohibitively high that it prevented widespread use from catching on. Previous reports also noted that the state treasurers in 11 different states got together specifically to ask Gilead to lower its prices.

Worse yet, Gilead will be competing with several other drugs that have long since been approved for use, though not for this purpose. Given that treatments of dexamethasone and the controversial hydroxychloroquine/azithromycin / zinc combination are substantially less than the $3,120 Gilead is quoting, it could be a real problem going forward. However, with the US government already having contracted to buy half a million doses back in June—President Trump previously promised free access to the drug for Americans—the issue could ultimately be moot.

The marketing strategies will likely have to be worked out later, but for now, this is certainly reason to take notice of Gilead, who can now say that it was first to beat coronavirus...under certain conditions and applications.

 

Companies Mentioned in This Article

CompanyBeat the Market™ RankCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Immunomedics (IMMU)1.4$87.86flatN/A-50.79Hold$52.00
Gilead Sciences (GILD)2.9$60.03flat4.53%61.89Hold$76.15
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