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3 Reasons the Market Is Down on Gilead Sciences


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After a solid two-year run, Gilead Sciences (NASDAQ: GILD) has fallen from investors graces, down for the year. The biotech has become increasingly reliant on its hepatitis C drug Sovaldi with competition from AbbVie (NYSE: ABBV) and Merck (NYSE: MRK) around the corner

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3 Reasons the Market Is Down on Gilead Sciences

  1. 1. 3 Reasons the Market Is Down on Gilead Sciences
  2. 2. 2013’s Market Darling...
  3. 3. ...Hasn’t Seen the Love Continue
  4. 4. 1. Remember That First Chart? • The stock has doubled over the last year, but if we zoom out a little more it’s been quite a run. • Some investors are likely selling to lock-in gains.
  5. 5. 2. Sovaldi, Sovaldi, Sovaldi • Hepatitis C drug approved in Dec. • Multi-billion dollar potential. • Combination product under FDA review will increase use. • With 2013 revenue of $11.2 billion, Sovaldi sales will have a substantial impact on Gilead’s earnings. • With reliance, comes worry... Source: Gilead Sciences
  6. 6. About Pricing and...
  7. 7. Competition • AbbVie’s (NYSE: ABBV) combination product is just a few months behind Gilead’s (Nasdaq: GILD) Sovaldi combination, but it doesn’t appear to be as convenient to take. • Merck (NYSE: MRK) is further behind, but looks like it has a combination pill that works as well as Gilead’s combo – cure rates in the 95%+ range – and could be taken just once per day. Phase 3 data should be available next year.
  8. 8. 3. The Whole Industry Is Down • Gilead has underperformed the index for the year...
  9. 9. 3. The Whole Industry Is Down • But if you look since the peak, it’s matching the index. • Investors are shying away from the biotech’s risk.
  10. 10. Where’s the Bottom? • Hard to predict. • Pricing issues might blow over, but worry about competition will continue until Gilead proves its dominance. • End of industry downturn will be determined by investors’ risk tolerance, which could tighten further.
  11. 11. Think Long Term • If you’re planning on holding for multiple years, catching the bottom doesn’t matter too much. • Gilead is expected to generate its market cap in cash over the next seven years. • Even if it takes 10 years, it’s a substantial deal for a company with growth potential.
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