Hi Alphab,
I own Gilead, and I think it is a great long-term investment.
I believe the hesitation, both here and in the market as a whole, lies in uncertainty of ‘whats next?’. They dominate the HIV treatment market, and now they dominate the HEP-C market (as least for some genotypes). The success of their HEP-C cure has been phenomenal, driving revenues and earnings sky-high for the past couple of years.
But, what next? What is the next driver of superior growth?
THAT is the question. I think they will use the huge cash reserves they are reaping from the HEP-C franchise to buy smaller companies with promising pipelines. There has been talk focused especially on getting into the HEP-B business (which seems to be even bigger than HEP-C). But right now, there is no heir apparent, and the sweet earnings growth will soon level off as Harvoni/Sovaldi penetrate more and more markets. Not this year, maybe not next year, but ultimately, they will revert to an ‘ordinary’ growth rate.
I honestly thing that the market hasn’t yet adjusted to the rapid acceptance of the HEP-C drugs by many countries and many insurers. The thought was that the $84,000 price tag would doom it to modest success, but since the cure rate is so high, it is being welcomed by most providers. So, market saturation in the US is still several years out, and the rest of the world will continue to adopt these drugs. I see at least 2-3 years of stellar growth. Eventually, Mr. Market will fall in love and drive the price up accordingly.
Just my thoughts as a fellow investor. Right now, Gilead offers growth at what appears to be a great price.
Tiptree, Fool One guide, long GILD