Pharma heavyweight Gilead Sciences (GILD) was initially one of the main beneficiaries of COVID-19. Shares surged following the pandemic’s onset, as hopes were pinned on Gilead’s antiviral COVID-19 treatment, remdesivir.
Yet, since the yearly highs were notched at the end of April, sentiment has soured. Weak earnings, concerns around the monetization of remdesivir and a CRL (complete response letter) from the FDA for rheumatoid arthritis (RA) treatment filgotinib have all played their part in the downturn.
However, might the tide be turning again? GILD is set to acquire biotech Immunomedics for $21 billion.
Gilead’s interest in the high-flying biotech is mostly down to its breast-cancer drug, Trodelvy, which in its first two months on the market generated sales of $20.1 million. The acquisition will most likely help alleviate what Oppenheimer analyst Hartaj Singh believes are “existential concerns around core franchises in HIV, HCV and oncology.”
Even without taking the Immunomedics deal into consideration, Singh notes Gilead is “one of the cheapest large-cap biotech stocks on P/E,” and that it is on the verge of “a paradigm shift in growth.” The 5-star analyst argues investors have been “too leery of remdesivir’s data and the recent filgotinib CRL.” Singh calls the latter’s travails a “hiccup” soon to be rectified.
Summing up his positive thesis, the analyst said, “With a dividend yield of ~4%, a core franchise in HIV growing in the high single digits, and HCV potentially stabilizing, GILD is ideally positioned. Near-term pipeline projects remdesivir, filgotinib and magrolimab now provide us enough visibility to integrate into our model and drive GILD’s 3-5 year sales/earnings CAGR to ~9-10%; among the best in its peer group.”
Singh’s confidence is conveyed by a price target raise. The figure moves from $90 to $105 and could provide investors with returns of 60% over the next 12 months. Singh’s rating stays an Outperform (i.e. Buy). (To watch Singh’s track record, click here)
Singh is Wall Street’s most prominent Gilead bull, although overall his colleagues remain upbeat on the pharma heavyweight’s prospects. GILD’s Moderate Buy consensus rating is based on 10 Buys, 10 Holds and 2 Sells. With an average price target of $80.12, the analysts expect shares to add 22% of muscle in the year ahead. (See Gilead stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.