“Gilead” is the name of the fictional dystopia in The Handmaiden’s Tale, a 1985 novel that was this year adapted for television. Given the totalitarian nature of that fictional society, the name might raise negative feelings in some people.
Fortunately, there’s a real, fully-non-fictional Gilead that we can feel much better about: Gilead Sciences, Inc. a California-based biotech firm that has made waves in recent years for its innovative Hepatitis C and HIV/AIDS treatment drugs.
The company’s stock (GILD on the NYSE) is currently trading at $70.65 after having ups and downs the past two years. GILD traded as high as $114 in 2015 before falling to $64.57 on February 9. According to most analysts, the stock became overvalued after exploding in 2014 and 2015, and some investors were unsure about President Trump’s attitude toward the pharmaceutical industry.
The stock finally bottomed out and is on the upswing again, so investors looking for a short-term win should fine one with Gilead. It has really recovered in June, gaining more than 9% since May 30.
Gilead Has Strong Financials
Total revenue for Gilead came in at $30.39 million in 2016, down somewhat from 2015 numbers but way higher than in the years before that. It’s also worth noting that R&D spending was up 40% in 2016—proving the company’s commitment to long-term performance. Gilead also managed to significantly slash operating costs as a share of total revenue.
If that’s not enough to persuade you, the company is making some unexpected moves internationally that could set it up for the future.
Gilead is Eliminating Hep C in Georgia
Gilead has one little-known project that should have stock market investors excited. The company is currently conducting a major experiment in the small ex-Soviet country of Georgia, where Hep C has been a major public health problem since the 1990s.
Since 2015, all Georgians suffering from the disease–about 130,000 people in total–have received free medication produced by Gilead and administered in part by the US Center for Disease Control and the Georgian Ministry of Health.
Gilead is providing two of its best medications free of charge to wipe out the disease. Gilead’s medication Sovaldi was administered in 2015 to 5,800 Georgian Hep C patients suffering from liver fibrosis and cirrhosis. In 2016, it started distributing a second drug, Havroni, to those suffering from active Hep C infections. By 2020, Georgia hopes to become the first country to abolish Hep C entirely.
These drugs are the real deal: Georgian government officials and doctors reported that more than 90% of people fully recovered after receiving two years of treatment. Even those with severe liver damage had an 80% recovery rate after two years.
Why This Matters to You, a Stock Market Investor
The free drug program Gilead is implementing in Georgia is part of its corporate social responsibility strategy. It’s extremely generous: on the US market, a single Sovaldi pill costs $1,000 and a 12-week treatment program with Havroni can cost $84,000. That’s a lot of money going down the tubes.
However, that doesn’t mean Gilead’s eyes aren’t still clearly focused on dollar signs.
This isn’t charity, it’s an investment: if Gilead succeeds in abolishing Hep C in Georgia, it will expand the market for its products worldwide. Additionally, it can make the case for more national and international funding to wipe out the disease in developing countries: money that could wind up back in the company’s pocket because it will manufacture the drugs used in the elimination programs.
We’re watching Gilead closely, and we advise other investors in pharma stocks to do the same. Gilead’s Georgian project will wrap up in 2020, and all accounts are that it will be a success. That should increase interest in the company—and send its stock price upward, both in the short and long term.