Gilead Sciences, Inc. (GILD) has been one of the popular stocks in the biopharmaceutical industry since late last year, owing to the success of its COVID-19 drug Remdesivir. The stock gained 15.4% year-to-date, outperforming the benchmark Nasdaq Biotechnology index’s 5% returns.

Apart from expanding the production and market reach of its highly coveted drug, GILD has been developing a portfolio of cancer drugs. With impressive clinical trial results of these drug candidates and continued demand for its commercially available products, GILD’s growth trajectory is likely to keep accelerating. Given the company’s growth potential, the stock looks undervalued at the current price level. In terms of non-GAAP forward P/E, GILD is currently trading at 9.52x, 60.8% higher than the industry average of 24.28x. Its non-GAAP forward PEG ratio of 1.91 is 3.8% higher than the industry average of 1.98. Also, its forward Price/Sales and Price/Cash Flow ratios of 3.42 and 8.22 compare with industry averages of 7.98 and 18.91, respectively. So, it could be a perfect value pick right now.

Here’s what could shape GILD’s performance in the near term:

Remdesivir: A Blockbuster Drug

GILD’s drug Remdesivir (sold under the brand name Veklury) has been a game-changer in the treatment of COVID-19. Initially developed as a treatment for hepatitis and respiratory syncytial virus, Remdesivir showed its efficacy against COVID-19. Remdesivir is the first drug to be approved by the FDA for treating COVID-19 patients in the United States.

GILD’s revenues over the past couple of quarters have been largely driven by its Veklury sales. For the fiscal first quarter ended March 31, the company’s net revenues increased 16% year-over-year to $6.40 billion. However, GILD’s total product sales, excluding Veklury sales, declined 11% year-over-year.

GILD entered into an extensive agreement with medical communities in India to boost local production of Remdesivir in the country to combat the deadly second wave. Given the rising demand for the drug in the Asian subcontinent, this partnership should boost GILD’s sales in the upcoming quarters.

Long-term Growth Potential

GILD’s diversified drug pipeline and impressive clinical trial results make it one of the most attractive biotech companies in the United States, with immense growth potential. Following the commercial success of Remdesivir, the company has shifted focus to drugs catering to life-threatening ailments. Its extensive cancer research has been yielding results over the past couple of months. GILD’s drug Trodelvy was approved by the FDA in April for treatment of breast cancer and urothelial cancer.

GILD’s wholly-owned subsidiary Kite partnered with Shoreline Biosciences, Inc. yesterday to develop novel cell therapies for treating multiple cancers. Multiple drugs for dedicated cancer treatments have garnered impressive results from their clinical trials. Also, the company has exclusive rights to develop and commercialize recently approved (by the FDA) drug for cancer immunotherapy treatment, initially developed by Jounce Therapeutics, Inc.

These recent developments demonstrate GILD’s progress in the field of cancer research, making it well-positioned to achieve a breakthrough to develop efficient drugs to cure or treat cancer soon.

Consensus Rating and Price Target Reflect Potential Upside

Of the 13 Wall Street analysts that rated GILD, eight rated it Buy while five rated it Hold. The 12-month median price target of $79.80 indicates a 18.7% potential upside from yesterday’s closing price of $67.22. Price targets range from a low of $63.00 to a high of $100.00.

POWR Ratings Show Promise

GILD has an overall rating of A, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

GILD has a grade of A for Value and B for Quality and Growth. The stock’s lower-than-industry-average valuation justifies the Value grade. GILD’s trailing-12-month gross profit margin and levered free cash flow margin of 84.03% and 33.89% are higher than the industry averages of year55.84% and 2.8%, respectively, in sync with the Quality grade. The company’s trailing-12-month revenues increased 12.5% year-over-year, significantly higher than the industry average revenue growth rate of 6.92%, consistent with the Growth grade.

GILD is ranked #3 of 484 stocks in the Biotech industry.

In total, we rate GILD on eight different levels. Beyond what we’ve stated above, you can view additional GILD Ratings for Momentum, Sentiment and Stability here.

Click here to view the top-rated stocks in the Biotech industry.

Bottom Line

GILD’s progress on the cancer research front is impressive, making it one of the most promising stocks in the biotech industry. GILD’s strategic partnerships and solid financials should help the company fund its cancer drug developments, thereby making it an attractive investment bet with explosive growth potential. 

GILD shares were trading at $66.03 per share on Friday afternoon, down $1.19 (-1.77%). Year-to-date, GILD has gained 15.82%, versus a 11.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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