I previously was a proponent for owning GILD stock, and I posted a number of times about it. I sold the last of my GILD shares yesterday. Why did I sell?

I considered GILD a short term 6-9 month opportunity. I had intended to sell after the value of Solvaldi (the new HepC drug). Solvaldi did way better than expected last quarter…exceeding sales forecasts by $1 billion! I think they can repeat the success of Solvaldi sales the next few quarters and after reporting 3 more quarters, I believe their TTM Adj EPS will exceed $6. At a stock price of $80, the P/E would then be 13.3.

The success of GILD, while it looks good now, is not as clear to me as some other stocks. There are several companies working on HepC drugs and competition may affect pricing and market share. Also, Solvaldi cures >90% so they will be reducing the number of people who need the drug as they treat people. The stock of people with HepC is huge, but they saying that acquiring new customers is more expensive and more difficult than keeping existing customers. Well, their product is designed to be a one-course treatment.

I also looked at GILD’s historical financial results (prior to Solvaldi). Their earnings increase prior to Solvaldi is not impressive which tells me that their HIV business is not really growing fast. This also tells me (not considering their pipeline which I haven’t looked at in detail) that their future is highly dependent on Solvaldi’s success. This make owning the shares more risky as one bad quarter of Solvaldi sales can really hurt the shares. I have to agree with Saul that CELG is a much better biotech to own than GILD.

I redeployed most of the funds from the GILD liquidation into AIOCF which on which I see much better visibility for earnings growth.



Thanks Chris for explaining your thoughts.