Gilead’s Unexpectedly Bullish Outlook — Cancer, HIV Remain Key

Gilead Sciences (GILD) followed up a strong quarterly report with a third Food and Drug Administration approval for cancer drug Trodelvy on Friday, and GILD stock popped.

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The approval came less than 24 hours after Gilead topped fourth-quarter projections and reported bullish growth for its cancer medicines. Trodelvy, which was already approved for a form of breast cancer and bladder cancer, pulled in $195 million in sales, surging 65%.

On Friday, the FDA approved it for patients with another type of breast cancer — HR+/HER2- metastatic breast cancer. These patients have already worsened on previous treatment and tend to have poor outcomes, says William Grossman, Gilead’s senior vice president of oncology clinical development.

“After they cycle through endocrine therapies, then really they’re down to just chemotherapy options and those do not offer very good outcomes in general,” he told Investor’s Business Daily. “This is a large patient population” of more than 100,000 patients in the U.S. and Europe, he added.

On today’s stock market, GILD stock jumped 3.8%, ending the regular session at 84.50.

GILD Stock: A Growing Focus On Cancer

Trodelvy is an important medicine in Gilead’s growing war chest of cancer drugs. It’s an antibody drug conjugate. Think of these medicines like torpedoes, aiming to take down tumors with targeted chemicals. This eliminates the impact on surrounding healthy tissue, unlike chemotherapy, which kills everything in its path.

Grossman said the side-effect profile of Trodelvy has been particularly important for patients.

In the study, Trodelvy recipients experienced less fatigue and shortness of breath than those on chemo. On one measure, diarrhea, Trodelvy came out worse than chemo. But Grossman notes doctors are used to handling gastrointestinal side effects of some medicines.

Now, Gilead is working to expand Trodelvy to earlier-stage patients. It’s also testing the drug in various other cancers, including lung, prostate, head-and-neck and endometrial cancers. GILD stock investors are closely watching these efforts.

On a call with reporters Thursday, Chief Executive Daniel O’Day said Gilead is executing on a strategy it laid out several years ago. As a result, the base business grew 8% last year, returning to levels not seen since the hepatitis C treatment heyday in 2015. Now, Gilead expects 4%-6% growth in its base business this year. Analysts had forecast a decline.

“Today, our growth is driven by a far more diverse portfolio, including our therapies for HIV and oncology,” he said. “When we laid out our transformation strategy in 2019, this was our aim: To return to growth and to ensure growth would be sustainable.”

Covid Is Still A ‘Swing’ Factor

But the fourth quarter was really a story about Veklury, Gilead’s Covid treatment.

Though Veklury sales plummeted 26% to $1 billion, they still beat analysts’ expectations, by almost $500 million, SVB Securities analyst David Risinger said in a note to clients.

On a call the call with reporters, O’Day says the company’s thinking around Veklury has changed recently. It could be a more durable tailwind for Gilead than initially thought. To date, Veklury is the only approved medicine for hospitalized Covid patients. Antiviral pills from Pfizer (PFE) and Merck (MRK) are used at home.

“Veklury continues to play a role in addressing the public health challenges of the pandemic,” he said.

For 2023, Gilead expects $2 billion in Veklury sales, down from $3.9 billion last year. But SVB’s Risinger says Veklury could be here to stay. Veklury continues to strong-arm new variants as vaccination rates have stalled. Veklury has also been commercially available since 2020, so it’s not facing the same transition from government contracts as the Pfizer and Merck pills this year.

“Management conveyed on the fourth-quarter call that its Covid antiviral business is looking more durable than the company expected one to two years ago and reiterated confidence in GS-5245, its oral version of Veklury now in Phase 3 (testing),” he said.

GILD stock analysts forecast steep Veklury declines. They project $1.4 billion in sales this year and $940 million next year. But Risinger says it’s unlikely 2023 Veklury sales will be less than half of 2022 sales.

He kept his market perform rating on GILD stock.

Excluding Veklury, Sales Still Outperformed

During the December quarter, adjusted Gilead earnings launched 142% higher to $1.67 a share, beating expectations for $1.51, according to FactSet. Sales inched 2% higher to $7.33 billion — well above Wall Street’s estimate for $6.63 billion.

Excluding Veklury sales, Gilead’s total fourth-quarter product sales climbed 9% to $6.3 billion.

The company’s cancer treatments also tacked on another quarter of bullish growth and narrowly beat expectations. Sales of cell therapies Yescarta and Tecartus soared a collective 75% to $419 million. Analysts had called for a total $414 million from the duo.

Sales of HIV treatments also jumped 5% to $4.8 billion — helped by 15% growth from Biktarvy, to $2.9 billion. That was narrowly above GILD stock analysts’ call for $2.83 billion.

Guidance Above Forecasts

For the year, Gilead expects $26 billion to $26.5 billion in sales, including roughly $2 billion from Veklury. Analysts had actually called for a decline in product sales to $25.67 billion. They had also projected just $1.38 billion from Veklury.

Risinger, the SVB analyst, says the guidance appears conservative, taking into account the shift in higher HIV drug prices plus the potential for “major swing factor” Veklury.

Gilead stock is forming a flat base with a buy point at 89.84, according to MarketSmith.com.

Shares have an IBD Digital Relative Strength Rating of 85. This puts GILD stock in the leading 15% of all stocks in terms of 12-month performance.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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