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Gilead (GILD): 'A Great Company With Big Catalysts'

February 15, 2008


Bloggingstocks.com
By Steven Halpern


"Of all the stocks that I follow and recommend, there is one stock above all others that I have favored for years, and still do: Gilead Sciences (GILD)," says biotechnology sector expert Michael Shulman.

In his industry-leading ChangeWave Biotech Investor, he explains, "I have owned it for a very-long time and it is fast-growing and rock solid among all of the market uncertainty. When that uncertainty ends, GILD will still be a fast-grower in a recessionary economy."

"The company is a commanding market leader in HIV treatments, sells and collects royalties on other antivirals for flu and Hepatitis B. Gilead recently announced earnings and it had profits of $402 million or 41 cents a share, topping analyst estimates by a penny. It also saw sales grow 22% to $1.1 billion. Despite several product launches and increased clinical trial expenses, the company's cash position doubled to $2.7 billion.

"On a conference call, management said that 2008 would be a very good year, with product sales in the range of $4.7 billion to $4.8 billion. That's more than a 25% increase over 2007 product sales and higher than analyst expectations of $4.6 billion.

"Growth was driven by HIV drug sales, which were up 35% last quarter to $864 million. Management does not guide profit expectations, but the Street has those profits at around $1.88 billion, and Gilead has beaten expectations 14 out of the last 15 quarters.

"Gilead bought Corus Pharmaceuticals and Myogen Inc. -- and GILD has made these acquisitions work for it. With them, Gilead has a new drug for pulmonary arterial hypertension, Letairis, and a potential new drug for cystic fibrosis infections awaiting approval from the FDA.

"Gilead expects an approval for the cystic fibrosis drug and also for its lead HIV drug, Atripla -- recently approved in Europe. Another drug should complete Phase II trials this year, as well. All of these catalysts will supercharge GILD and lead to double-digit sales and profit growth. At current valuations, the stock is cheap, as I believe Gilead will earn in the vicinity of $2 to $2.20 this year, giving it a P/E of 20-22.

"The market is also looking for big-cap names in life sciences, and money is flowing their way, so I expect multiple expansions to hit the stock once the market has stabilized a bit.

"One wildcard in the profits picture is Tamiflu. Gilead gets an 18%-22% royalty on it, and sales by Roche have slowed markedly as pandemic flu fears recede and governments are pulling back on stockpiling the drug. The other wildcard is a stock buyback or new acquisition by GILD. The former would goose the stock, the latter would depress it temporarily.

"The bottom line is that Gilead is a great company and a great stock building a strong base. It's facing several big catalysts and upside earnings surprises in 2008."

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